Credit card counseling

Pros and cons of credit card counseling

Here we’re going to study closely all possible benefits and disadvantages of credit card counseling on the truthful example of the real person.

Paul is 30 year old man with the handful of credit cards. Since he started earning more, along with the high salary he obtained the habit of digging deep into credit amount. No wonder the time came when he appeared to be far past the credit limit. That was when he started looking for the solution and decided credit counseling would be the best option. This way is widely used in Texas, Massachusetts and other USA states.

The main duty of credit counseling providers is to stay between debtors and creditors, trying to bring their financial misunderstanding to some kind of solution and satisfy both sides. The DMP (debt management plan) usually appears to be helpful.

Pros of credit card counseling procedure

The greatest advantage the credit card counseling agency can offer is negotiation with your creditors for any better deal than the one you’ve got now. This can be lowering the total debt sum or getting lower interest rate, or even canceling charges and fees. Your debts can be combined into one single loan through DMP, so an agency will tile your monthly payments between your creditors. In this case the most troubled debts will be paid first for your fees or charges not to grow. A small tile of your investments will go to agency’s account as a fee; still it will be no more than $50.

You will have your relationships with your creditors improved, so will improve your credit score due to the regular payments according to the new schedule. The creditors will most likely stop calling you since they will see you trying sincerely to cope with the trouble of debt. This will keep you from collector calls as well, though you might still receive them time after time. For this case you may inform your agency about the calls and most likely get their approval to re-address the collectors straight to yourcredit card counseling agency. This is the common practice in Florida, Texas and other USA states.

Cons of credit counseling procedure

The credit card Debt management plan also includes some advices about your spending habits. For example, you will be advised to limit your shopping and other expenses for the time of your credit repayment. You will have to restrict yourself from your usual fun for quite a long time.

Though the repayment options are quite flexible, there’s still some amount of money you shall may monthly. Otherwise creditors might not count this as enough payment to go on with the program.

Still the most destructive case is the mismanagement. We’re all people and credit counseling managers are as well. This means they are totally capable of making mistake and misjudge the situation. As a result you maysuffer significant losses and even more problems with creditors. This also ruins the credit report and credit history, the one that should have been mended by regular payments through DMP.

The usual result here is bankruptcy with the mark remaining in credit history for 10 years according to Chapter 7 bankruptcy rules.

That is why you shall calculate everything twice before making your final choice about the company you’re going to turn to and the way you’re going to use in order to solve your financial troubles. In case you count everything correct and enroll the suitable DMP, you will most likely be debt free within 3-5 years.