Having high credit card debt can cripple your finances. When money runs out, then you have to make some tough choices. While many living costs are fixed, you might be surprised to know that you may be eligible for lower payments on your credit cards through a method that does not involve bankruptcy or debt settlement.
You may have heard of credit counseling before, but perhaps you were apprehensive about divulging your private details to someone you don’t know. However, knowing that you have the opportunity to ask important questions from a certified counselor without ever leaving the privacy of your own home might be enough to gain your interest.
Credit counselors do not typically tell you to cut out all discretionary spending or judge you for your decisions. Remember they talk to dozens of people just like you every month. Yet they also understand that no two situations are alike, so they gather lots of information from you so that they can evaluate your financial state.
Credit counseling goes beyond just making budget modifications. These agencies have a special tool known as a debt management program (DMP) which could make a big difference in your budget. Imagine being able to repay your credit cards at a lower interest rate than you currently have. If your situation meets qualifications, you might be able to do just that.
A key feature of debt management programs is a reduction in your individual credit card payments. Program participants commonly are granted interest rate reductions by their creditors–reductions that allow for reduced monthly payments.
As a convenience, modern credit counseling agencies offer substantial automation. This includes online account maintenance and a lower consolidated monthly payment. The beauty of this payment is that it can lower your monthly minimum payment requirements even if you are in arrears. The program allows you to avoid catching up on arrears for most creditors. Only a handful of miserly creditors do not allow reaging of your accounts. Reaging is the magic behind restoring current status to delinquent accounts.
To be clear: the online advertisements that boast that they can drop your payments in half are largely unrealistic. Those types of arrangements are usually complicated debt settlement programs that have success rates under 10%. With a debt management program, minimum payment reductions of 10-30% are more commonplace. While some clients facing substantial delinquency can see a larger drop, you should expect a more moderate reduction.
For a detailed look at what credit counseling could do for you, contact an agency today. You have the benefit of getting multiple opinions and comparing plans from each agency. It helps to refer to your latest credit card and personal loan statements so that you can provide exact figures about your situation.
Speaking with a counselor provides the best opportunity for you to ask important questions and provide a true representation of your situation. Still, you can also test the waters by utilizing the online counseling feature provided by larger agencies.
Be honest with yourself. If you are no better off than you were a year ago and are still struggling to make debt payments, your method is not working. This is precisely the typical scenario where a credit counseling client finds that they can qualify for and benefit from a debt management program.
It is not a magic pill. It can at times be difficult if you experience interruptions in income. If you can stay the course, you can emerge from your financial situation stronger than ever before and with your credit rating intact.
Long is a graduate of the University of North Carolina at Chapel Hill with a B.A. in Industrial Relations. He subsequently received his Certificate in Nonprofit Management from Duke University. His Certificate in Financial Planning was issued by Florida State University.
Long has achieved the Accredited Credit Counselor and Accredited Financial Counselor certifications through the Association for Financial Counseling, Planning and Education. Long originally achieved the Certified Credit Counselor designation through the National Institute for Financial Education.
In addition to years of nonprofit leadership, Long has been an innovator in the field of volunteer tax return preparation programs. He assists volunteer associations and nonprofit organizations who seek to integrate credit counseling and asset-building programs with free personal income tax preparation. His approach to using free credit reports as both an incentive and a screening tool for placement into asset-building programs has been shared with members of the National Community Tax Coalition, the EITC-Carolinas Initiative of MDC, Inc. and nonprofit groups across the Carolinas.
Long assists members of our armed forces in the Carolinas, Iowa, Rhode Island, Georgia and Germany with financial readiness. Please support our Soldiers, Marines, Airmen and Sailors!
Favorite quote:
"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."
Thomas Jefferson
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