Credit counselors play an essential role in the financial space. With so many people grappling with money, budgeting, and debt management, there comes a need for personalized resolutions to help you navigate all that without drowning in complicated financial situations.
Credit counseling organizations are non-profit organizations with certified and trained personnel or counselors specializing in consumer credit, debt management, and budgeting.
These counselors discuss financial situations one-on-one to help you create a personalized plan to solve your financial problems.
As you shop for the most suitable credit counseling organization, remember that credibility matters before anything else. It is crucial to remember that reputable credit counseling organizations should be ready and willing to provide information about them and their services, even before you can describe your situation. The contrary should raise doubts about their trustworthiness.
Here are some crucial questions to ask when looking for the best credit counseling service for you:
1. Are You an Accredited Company?
The credit counseling organization should belong to a certified agency. Look for an organization with an A+ rating and Better Business Bureau(BBB) accreditation, as this is the highest standing an organization can receive. With that accolade in the bag, you can be sure of receiving the best consumer credit service.
Other crucial qualifications to look out for include accreditation by the National Foundation for Credit Counseling or the Council of Accreditation.
2. What Qualifications Do Your Counselors Have?
Aside from the organization’s accreditation, it is vital to know whether their counselors meet a certain standard of education and training. Also, stay keen on the experience of individual credit counselors before working with them.
3. What Services Do You Offer?
The field of credit counseling is broad; thus, It is not unusual for companies to cover several areas.
Some companies like offer a variety of services such as debt management, student loan management, home ownership counseling, bankruptcy, foreclosure prevention, credit report reviews, etc. As they answer this question, identify the service that covers your financial issue.
Avoid companies that have limited options, as they may constrain your remedies. Most importantly, keep away from companies that only champion debt management plans as the only option, even before analyzing your situation.
In some cases, credit counseling might have to give way to debt relief. In such instances Freedom Debt Relief can provide those services.
4. How Do You Conduct Credit Counseling Services?
Your first encounter with the credit counseling organization may be over a phone call; however, the company could offer in-person or online meetings. A company that gives you the convenience of choosing which method serves you best is better as it shows that they are flexible and willing to make you comfortable.
5. How Much Do Your Services Cost?
It is worth noting that all agencies certified by the National Foundation for Credit Counseling offer free services, regardless of the number of meetings. However, there is a thin line between credit and debt management services.
While consumers do not pay for the former, credit counselors may charge fees. For example, suppose the company offers credit card debt relief. In that case, you will have to discuss the fees they usually take from your payments to their accounts.
6. What Happens If I Cannot Afford Your Fees To Make Contributions?
These organizations are mandated to offer free credit counseling as they receive compensation grants or are funded by creditors and other credit card issuers. Therefore, it is wise to avoid organizations that charge for their services.
7. How Will Your Services Impact My Credit Score?
Depending on your financial situation, a good credit counselor should know what to expect after you sign up for one of their programs. That includes their service’s short-term and long-term impact on your credit records.
8. Can I Have A Formal Written Agreement Or Contract Before Working With You?
Like any service provider, your credit counseling organization should be able to give out the details and terms of their service on paper. Always read the contract carefully before signing.
9. What Types of Payment Plans Does a Credit Counselor Offer?
Credit counselors are trained to evaluate your financial situation and develop a personalized action plan to address your debts. Depending on your income and expenses, they may be able to offer you a few different types of payment plans that can help you get back on track financially.
The four main types of payment plans that most credit counselors may provide include:
Debt Management Plans (DMPs):
DMPs allow you to make one monthly payment towards your debt that is then distributed among the creditors listed in the plan. Credit counselors will normally negotiate lower payments or interest rates with creditors on behalf of their clients, making the repayment plan easier for the consumer to manage.
During this process, credit counselors work with consumers and creditors to create a realistic repayment plan for outstanding debts that are able to be completed in 3-5 years or less.
Credit counseling agencies will typically try to negotiate lower payments with creditors as well as potentially waived fees and other penalties like interest rate reductions in exchange for paying off balance successfully by consumers.
Debt Consolidation Loans:
This type of loan is taken out by consumers who want keep all their existing debts consolidated into one manageable loan agreement, usually from a bank or loan provider such as a credit union or online lender.
Through this process consumers are provided with an approved loan amount which is then used to pay off all outstanding balances prior to repaying the consolidation loan over an agreed upon term at a fixed interest rate.
Bankruptcy should always be seen as a last-resort option due its long-term consequences such as diminished chances of receiving future loans or lines of credits as well potential damage claimed assets against delinquent balances owed by individuals filing for bankruptcy protection in court system through filing Chapter 7 or Chapter 13 petitions.
When it comes to financial services, compromise is out of the question. Due diligence is necessary for finding the best credit counselor for you, as your financial stability will depend highly on them.