When you accumulate a large amount of debt, you have a number of options that could provide assistance. One of the most commonly used options is credit counseling. Credit counseling is a service that is provided by various debt relief companies and helps you get on a payment plan with your creditors.
Debt Management Plan
The primary component of the credit counseling process is the debt management plan. The credit counseling company that you work with will help you set up a debt management plan with all of your creditors. This is a plan that involves you making a monthly payment to the credit counseling company. The credit counseling company will then take your money and distribute a portion of it to each of your creditors in the plan. The debt management plan could last five years or more depending on your situation.
Negotiating
When you work with a credit counseling company, they will handle the process of setting up the plan for you. The credit counseling company will negotiate lower interest rates on your accounts in most cases. For example, if you have credit card debt, the credit counseling company will negotiate it down to a more reasonable level. They will also agree on a monthly payment that you will pay each creditor. With this negotiation, the credit counseling company can potentially save you a large amount of money on interest.
Fees
One of the potential drawbacks of working with a credit counseling company is that you have to pay them a fee for their services. Most credit counseling companies take a monthly processing fee for handling the plan for you. Most of the work that credit counseling companies provide could be done on your own directly with your creditors. You could set up a debt management plan with your creditors if you were willing to negotiate with them. This means that you are paying someone for something that you could do yourself.
Other Options
When you are in serious debt, it may be to your advantage to consider more options than credit counseling. While credit counseling can help some people, others who have significant amount of debt or low income may not be able to benefit from this process. Instead, you might have to consider filing for bankruptcy and eliminating your debt. Debt settlement is another option that some people choose because it allows them to pay off their debt in a lump sum and save money.
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