Will Consumer Credit Counseling Help If You’re Falling Behind?

One of the more popular debt consolidation programs out there is known as consumer credit counseling. Commonly referred to as debt management, credit counseling is where a person works with an agency which has agreements with the creditors for set interest amounts. The creditors in turn give the agency a kick back percentage once the person finishes paying back the creditor in full.

 Many of these credit counseling companies are listed as non-profit. This gives the consumer the belief that either the agency does not charge for their services or is backed by the government somehow. The fact is that being non-profit does not mean they do not charge, or even that they are approved by the government. It simply means that any profits they have (After paying all their employees whatever they choose to) are put back into the company. In fact being non-profit actually can benefit the creditor even more, in that they can write off whatever kick back they give the agency as a donation to a non-profit organization.

With a consumer credit counseling program, you must either be current with your creditors or have the accounts re-aged. You must enter all of your cards into the program and can’t keep any of them active while in the program. You pay back 100 percent of the debt, some interest and also a monthly fee in addition. This means that in the end you pay back about 120 percent of what you owe today. It will typically take you five to six years to complete a credit counseling program and the amount that you are paying to the agency is usually the same or sometimes even a bit more than what you are paying on your monthly minimums right now.

Because of this many people who were struggling to stay current and enter into a credit counseling program end up failing. In most all cases if you miss one payment they will remove you from the program without the possibility of getting back in. This essentially puts you right back where you were before.

Credit counseling is not your only debt consolidation option.  For more information about credit counseling and other debt relief programs speak to a debt analyst who can review all the choices you might have in dealing with your overwhelming debt.