The debt-ridden may wonder just how on earth they found themselves with massive credit card balances and several outstanding loans. Ultimately, constant borrowing without paying the debt back is how the massive balances ended up accumulating. Knowing how the debt amassed is important since this aids in avoiding making the same mistakes in the future. When buried under debt, maybe the best first lesson to learn is how to get out of debt. Credit counselors absolutely are able to assist the financially indebted find a way out of a fiscal mess they are in.
Service and Assistance
A credit counselor is not simply available to lend a sympathetic ear and say everything is going to work out well. Credit counselors perform very specific services designed to arrive at a direct result. The result will, hopefully, be a better financial position.
Credit counselors aid in putting the debt situation in perspective. People know they have borrowed too much, but they might not realize how the process played out. Charging a $2,000 television is definitely an obvious sign of overspending. Borrowers may not realize all those smaller and avoidable purchases created so much debt. A review of credit card statements may reveal all those charges to restaurants during the week. Consistent and cheaper grocery shopping could eliminate $3,000 or more in debt per year.
Lamenting on how a great deal of debt was amassed is not enough. A counselor has to explain ways of getting out of debt. A counselor may mention areas that could — and should — be cut to create more cash flow. A more effective payment plan might be devised thanks to the insights of a credit counselor. He or she could suggest consolidation loans or other repayment strategies to reduce outstanding obligations in a timely manner. In very serious situations, the counselor may discuss the subject of bankruptcy. Hopefully, the counselor will be able to point of viable alternatives to the more impacting issue of filing for chapter 7 or 11.
The greatest benefit to working with a credit counselor is the ability to tap the counselor’s experience. He/she has handled many cases and understands how to properly address eliminating and managing debt.
Alternative Debt Relief Options
Counseling might not be enough to address a heavy-debt scenario. Seeking legal protection under the bankruptcy laws might be the only option for some. Other strategies do exist. Working with a debt management service is one. Debt managers do not counsel as much as they take over certain responsibilities for a fee. Debt managers devise payment plans with creditors and deal directly with credits as representatives. They may negotiate lower interest rates, lower monthly payments, and more.
Debt settlement services try to put an end to a hopeless situation when the borrower just can’t pay anymore. A debt settlement is a partial payment made to a well past due account design to avoid the bankruptcy. Unsecured debt may be outright dissolved in total in bankruptcy proceedings. A settlement might not be welcomed by a credit card company, but a settlement is better than a total loss.
Those who seek settlement agreements do need to be aware that debt settlements do lead to very bad marks on a credit score. Also, the amount forgiven through the settlement may be considered taxable.
Credit counseling is worth exploring first to avoid any unintended consequences.
Explore Credit Counseling
Credit counseling might not provide the seemingly immediate solutions of bankruptcy, debt settlement, or debt management, but the costs are far less and the impact on a credit rating is hardly going to be severe. Counseling might prove far less painful and lead to desirable solutions to even the worst debt scenario.
The Path Beyond Counseling
Upon completing credit counseling and eliminating debt, a new approach to fiscal sanity must be undertaken. Don’t get into the same financial problem again or the nightmare is going to repeat. The advice of a credit counselor should stay with a client long after the sessions end. Really, what is the alternative?