March 24, 2017

Debt Counseling

Too much outstanding debt is now a frequent concern among many people from various walks of life. Unmanageable credit card balances, outstanding loan repayments and mounting interest rates add up to a quite stressful daily situation, and these debts also do not bode well for long-term financial health. One of the first possible answers many individuals consider is bankruptcy to discharge the outstanding debts, but this option comes with plenty of longer-term drawbacks.

Instead of the drastic credit rating reduction that comes with bankruptcy, debt counseling services can educate clients about other manageable alternatives available to them. A knowledgeable debt counselor will review each individual’s recent financial records carefully and make recommendations for loan consolidation, negotiations for interest rate reduction and debt repayment schedules.

How a Debt Counselor Can Help

For clients experiencing difficulties managing their day-to-day household or business expenses, a debt counselor can assist with creating monthly budgets and identifying areas to eliminate unnecessary spending. Reputable and qualified debt counselors typically have professional backgrounds in financial advising and thorough knowledge of good expense management practices. In many geographic areas, debt counselors are required or highly encouraged to pass a professional certification exam demonstrating their expertise. Individuals considering a debt counselor are advised research several of them beforehand and look for one of these certification designations.

Personalized Debt Counseling

A personalized consultation with a debt counselor will involve a careful review of all outstanding balances owed, the interest rates on each account and the specific types of debts such as credit cards or personal loans. Debt counselors will also request a credit report for each client and will examine the number of missed payments over a certain time frame. This information will help the debt counselor determine how much each interest rate can be reduced, whether all outstanding debts can be rolled into one monthly payment and how much room each borrower has to negotiate with creditors.

Many debt counselors work on a non-profit basis, but others do work on a fee payment basis. When seeking help from a for-profit debt counselor, new clients should receive a break-down of any payments to be made to the debt counselor. They also normally receive information about fee payment options, whether upfront or later subtracted from adjusted monthly repayments to the creditors.

Debt Counseling for Adjusted Repayments

One of the most frequent services available from a debt counselor is a reduction of interest rates on outstanding debts, which can provide definite relief to borrowers struggling to afford monthly high-interest minimum payments. Clients who meet certain credit rating criteria can often get a 20%-25% interest rate lowered to about 10%-15%, though this result varies depending on different financial situations. A debt counselor can also advise clients on consolidating credit card balances into one new card with a 0% introductory rate for a limited time—typically six to 12 months in many cases. For those able to qualify for this option and make all timely payments, they get the advantage of paying off only the principle amount during this grace period.

Selecting a Reputable Debt Counselor

Individuals seeking debt counseling are advised to do some background research and comparisons of different debt counselors in their local areas. Word-of-mouth recommendations are invaluable, so talking to friends or colleagues who have gone through similar financial challenges can yield good recommendations. Non-profit credit counseling agencies frequently advertise on websites devoted to personal finance advice, and examining several of these sites can also result in some reputable possibilities for debt counseling services.

Potential debt counseling clients are additionally advised to check the credentials and years of experience for a debt counselor they are considering consulting. Certifications from professional credit counseling associations are always promising, and these credentials indicate a debt counselor has a continuing interest in assisting others achieve better financial futures.

Seeking help from a debt counseling service can be quite beneficial for individuals with the ability to pay all adjusted minimum amounts and the commitment to put each counselor’s recommendations into action. Debt counseling is set up to educate and assist with financial challenges, but the ultimate responsibility for becoming debt-free still rests on each individual seeking these debt help services.

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