Consumer Credit Counseling Agencies provide services to consumers overridden with debt. These agencies can and have in the past protected many customers from bankruptcy and serious debt litigation. These companies work with a consumer's lenders to reduce fees, interest rates and payments to come to a workable solution where both parties are satisfied.
Significance
These companies are a vital part of the nation's economy. They help to reduce the number of bankruptcies filed and ensure that lenders are at least partly compensated for what could have been complete losses. They also provide helpful eduction to consumers on financial best practices.
Types
One type of credit counseling service works directly with a customer's lenders. They negotiate to reduce outstanding balances, eliminate late fees and over the limit fees, and work to reduce interest rates. Some credit counseling agencies work with individual creditors and some work to consolidate all creditors into a new loan for a consumer.
Effects
A successful credit counselor will put a borrower on a track to good credit history. By eliminating high interest rates and fees, the agencies can put consumers in a better position to pay down debts, thus improving their credit score and reestablishing the relationship between the customer and lender for future business.
Misconceptions
A common misconception is that credit counseling agents are strictly available to profit from beleaguered customers. Instead, most credit counseling agencies' primary goal is to help customers regain financial stability. There are some agencies that are running for-profit businesses, but there are also many that rely upon government funding to run non-profit organizations.
Warning
Beware of any credit counseling agency that contacts you by phone. Aggressive lenders will try to prey on vulnerable consumers. It's best to contact a financial advisor and do research prior to signing on with any agency.
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