How Much Can You Save on Debt With Credit Counseling?

When it comes to finding out how much a person can save on debt with credit counseling, there's no one definitive answer. Each individual case has variables that make it unique. One client might have gone into debt because of poor money skills, while another might have suffered a medical setback. However, regardless of the circumstances, credit counselors assist in lowering debt with a variety of tools.

Budgeting

Credit counselors often provide advice to individuals seeking to lower their debt. This advice usually consists of such things as having the client realistically look at monthly expenses and eliminate any unnecessary spending. Often they advise selling any luxury items that can bring in cash, which can be used to lower the debt. Individuals who possess solid budgeting skills tend to have fewer problems with debt than those who don't credit counseling seeks to shore up those skills in the client. By devising a solid budget, an individual can help to reduce debt on a monthly basis, applying the money that's being saved to lowering the debt.

Misconceptions

Credit counseling shouldn't be confused with debt consolidation: Credit counseling isn't the same as a debt management program (DMP). A credit counselor works with individuals to help them make educated decisions about their personal finances, while a DMP combines all of the outstanding debt into one monthly payment. It should be noted that with certain terms found in debt management programs, the savings might not be as large as expected.

Creditors

Credit counselors may help an individual contact lenders to try to work out lower payments. This may result in big savings, depending upon the individual creditor. According to Franklin Debt Relief, Capital One and Discover are two such creditors that shy away from helping those in debt find relief. Credit counselors often caution against contacting creditors if there have been any major extravagant purchases recently made, as the lender may be reluctant to work with someone who should have been working on paying off a debt rather than on spending even more money.

Self-Reliance

Credit counselors work with individuals to help them become more self-reliant. By giving an individual the right tools to assist with his finances, it can help him reduce his debt. Depending on how aggressively the debt is attacked, a client can reduce his amount of debt almost immediately.

Warning

Before entering into any agreement with either a credit counselor or a debt consolidator, ensure that all relevant information has been documented. Any financial negotiations or terms discussed should be presented in writing. Agencies may appear to be operating in the best interest of the client but are actually trying to earn a profit. An individual should seek out credit counseling agencies that are nonprofit organizations, such as the National Foundation for Credit Counseling.