A debt relief counselor can help a consumer make decisions with the intention of reducing their debt loan and improving their financial situation. Debt relief counselors fall into two main categories: debt settlement counselors and credit counselors. The former, who is always associated with a law firm, can help a person settle debts with creditors. The other will generally provide financial advice designed to improve the person's management of debt.
Debt Management Strategies
A debt relief counselor will often help the person develop strategies that will help them cut down on their expenses and make the most of the money they have at their disposal. For example, the counselor may help the person identify unnecessary expenses that are eating up his funds each month. In addition, the counselor may introduce programs that can help consumers pay their bills or cut expenses.
Restructured Loans
Some counselors will also help people modify or restructure their loans. This can be done a number of ways. Some people may seek to refinance their loans, particularly if the loans are larger, such as auto loans and home loans. In addition, the counselors may help them develop loan modifications that they can present to their creditors. Some creditors may be willing to modify existing loans if it will keep the borrower from defaulting.
Debt Negotiation
Counselors may also help a person negotiate a debt settlement with their creditors. Sometimes creditors will agree to accept only part of an outstanding debt and not attempt to collect the remaining portion, as they would prefer partial payment over nothing. Counselors may conduct these negotiations themselves or provide their clients with strategies to help them negotiate with the companies. The downside to debt settlement is it can lead to a lower credit rating for the debtor.
Warnings
The cost of counseling, as well as the quality of the advice offered, can vary considerably. Some credit counseling services are not regulated by the government and may offer cookie-cutter service at high prices. In addition, some of these companies, even some of the so-called nonprofits, receive funding from credit card companies, which may lead the counselors to suggest advice that benefits the creditors more than it does the client.
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