Be Careful: Credit Counseling Is TOO EXPENSIVE For Most!
Credit Counseling
Pros
- No creditor phone calls.
- Reduce several payments into one.
- You should get lower interest rates. (On average around 10%)
Cons
- Bad for your credit score. Your creditors will report that a third party is helping you with your finances. Most lenders view this the same way they would a Chapter 13 bankruptcy.
- Too expensive. Counseling monthly payments often cost as much, if not MORE, than your current minimum payments.
- Potentially frustrating. A lot of counseling companies do not do what they say they will do.
- All cards will be closed.
- Too long. Takes about 5 years to complete.
- Lowest success rate of any debt program.
A credit counseling company has pre-negotiated interest rates with your credit card companies.
It is a program designed for those who have no trouble paying more than their minimum payments AND have cards with high interest rates. The money you save with these programs is money that would have been charged to you in the future, because your cards had a higher interest rate before you joined the program.
WHO IT'S FOR
Those who are current with their creditors but have high interest rates. (Typically above 13%)
Those who have less than $10,000 in unsecured debt should probably look at this option first.
Those who are NOT having trouble paying their minimums.
WHAT HAPPENS
1. You pull together a list of your credit card debts.
2. You call the Credit Counseling Company you are considering for a consultation, it should be free.
3. Review your accounts with the company and get an idea of the interest rates they can get on your cards.
4. Check the interest rates they can get and make sure they are lower than what you are currently paying.
5. Look at the monthly payments and make sure you can afford them. If you can't afford the payments you may want to consider settlement.
6. If counseling looks like the best option for you, I would recommend you check out Credit.com
Important: If you are struggling with your current minimum payments, this probably isn't the program for you. If you can't make minimum payments, settlement is probably a better program for you.
If you have been behind in the last three months or less, be carefull!! If you've fallen behind in the last three months you will likely fall behind again in the future.
