Debt solutions include many ways to help you get out of debt. If your debt per month is more than twenty percent of your total income, you have a problem that needs your immediate attention. Many people are only one or two paychecks away from financial disaster. Several debt solutions may help you, including credit counseling.
Many times, people think credit counseling is the same thing as debt consolidation or management. In fact, it is very different. A person involved in credit counseling is educated about credit and debt solutions. This allows you to make better financial decisions while planning for retirement and the future by making a plan based on your income and financial situation.
Contact a certified credit counseling office either online or by phone for debt solutions. The process is simple. You will answer a set of questions to help the counselor identify the cause of your financial problems. The credit counselor will need to know the amount of money you spend every month and your monthly income. This way the credit counselor can fully understand your need for debt solutions and can recommend the best debt solutions for you.
Your credit counselor will work with you to make up a monthly budget for your debt solutions and to get you on track for a good financial future.
Most credit counseling companies are free to those in need of debt solutions. However, credit counseling companies must make money, so they officially work for lenders. Therefore, you need to realize going in for debt solutions that credit counselors do not work for you. They work for lenders and creditors.
Credit counselors do not work to reduce or renegotiate the amount of your debt. Meaning, the balance you owe your creditors will stay the same with credit counseling.
Credit counselors simply work with lenders and creditors to decrease the interest rate for debt solutions. For example, if you are paying a twenty-one percent interest rate on a credit card, a credit counselor will negotiate a lower rate for you.
Lowering the interest rate, will not ensure more money goes to the principal balance on your debt. Typically, a percentage of your monthly payment goes to pay interest while the rest is applied to the principal balance. The amount of the payment going to interest is usually far more than the percentage going to pay the balance. That is why it is hard to pay down the principal balance when you only make the minimum payment.
This interest/principal payment ratio will not change with credit counseling. Even though you are paying less interest, you are still paying the same amount toward the principal. It is best to pay more than the minimum payment. The extra amount will always apply to the principal and not the interest.
Credit card companies and lenders will lower interest rates because they realize that by not doing so, you may default on the entire amount. If they lower the interest rate, they will still be making money because you will keep making payments instead of filing bankruptcy or defaulting. That is why credit card companies and lenders love credit counselors.
