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Best Debt Credit Counseling

Credit counseling, or signing up for a debt management plan, is a very common form of debt management. There are many companies offering credit counseling, both online and off-line, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. It is important to understand that, in a credit counseling program, you are still repaying 100% of your debts but with lower monthly payments. On average, most credit counseling programs take around five years. While most credit counseling programs do not impact your credit score, being enrolled in a credit counseling debt management plan DOES show up on your credit report. Unfortunately, many lenders look at enrollment in credit counseling in the same way as a bankruptcy filing.

Credit counseling is not a one–size–fits–all fix. A credit counselor will review your personal finances, including all income sources, all expenses and all debts, to create a money management and debt payment plan for you. They will help you to figure out where you can trim expenses. They will also negotiate with your credit card companies to reduce your interest rate so you can pay off your debts faster. Finally, most offer budgeting and debt education materials so that you can avoid getting into debt again.

When you choose to enter credit counseling, all of your existing debts are entered into the program and your account balances are frozen. Your existing credit accounts are suspended and you are prohibited from applying for new credit. This ensures that you will not be creating new debt while you are trying to pay off the old debt. It also forces you to learn to spend wisely. Rather than pay your creditors directly, you make a single monthly payment to the counseling service, which then pays your creditors.

In extreme cases, a counseling service may recommend debt settlement. They will negotiate with your creditors for a reduced balance, which you then pay as if it were the total balance due. This has tax and credit implications, so itís not the best option, but it may be the only option for very large debts.

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