How credit counseling works

Toward financial recovery-- Steve Sorensen

A lot of situations can lead a person to get mired in debt. And it can be immensely frustrating to watch the interests pile up from unchecked obligations, which is essentially an outcome of insufficient income. It is at this point that one should seriously consider credit counseling, if only to make ends meet and go down the path toward financial recovery.

Educating consumers -- Steve Sorensen

Credit counseling refers to a financial service that’s tailormade to instruct and educate consumers and assist them toward debt relief. The process helps consumers again take charge of their finances, this time with confidence. It also seeks to teach them how to make better financial decisions that should prevent them from incurring debt in the future. Steve Sorensen.

Many companies now offer credit counseling, with nonprofit agencies being ones that commit to the lowest cost financial services and solutions. Some agencies may provide more structured, optional services like the so-called Debt Management Plan or DMP.

Finding solutions -- Steve Sorensen

With a DMP extra service signed for, a credit counseling agency will proceed to get in touch with the client’s creditors on their behalf. This is done for a variety of reasons, from obtaining a lower interest rate to doing away with late payment fees and outright renegotiating the amount of client debt. Steve Sorensen.

Note that credit counseling companies may only work with credit card debt or unsecured debt. The goal is to collate all the unsecured debt of a given client into a single monthly payment, and to eliminate the entire debt within a period of five years or less. As a credit counselor reduces the overall debt, the client gets a lower monthly payment scheme that can be better managed, providing him or her with some financial leeway. Steve Sorensen.