Credit counseling and debt counseling are essentially the same service, and the terms are quite often used interchangeably as such. Counseling services are intended to educate individuals on dealing with their debt and ways to use credit wisely. They are also taught how to better manage their money in the future. This is to correct the bad money habits that caused the financial hardship they are in. This is the hardship that caused them to seek out credit counseling services.
While credit counseling services are usually sought out by people who are experiencing financial difficulties, it can help everyone develop better money management skills. It can also offer suggestions to help you keep away from common financial problems before they develop. Pre-bankruptcy credit counseling is required before a consumer can complete a bankruptcy filing.
There are two main providers of credit counseling services. Not-for-profit organizations typically provide credit counseling service but require you look after the legwork on your own. For-profit organizations also provide credit counseling and, for a fee, take on the job of getting negotiating with your creditors, and in some cases consolidation loans as well.
You can look at the National Foundation For Credit Counseling (NFCC) to find a reputable credit counseling agency in your city to help you.
Most credit counseling companies charge less than $50 a month for their services. If you have a severe financial hardship, a non-profit agency should be able to offer you a reduced fee or offer their services at no cost.
Some of the things a counselor should be able to help with include:
Preventing the need for you to declare bankruptcy if you can get your debt under control.
Preventing your paycheck from being garnished and avoiding legal action.
Stopping phone calls from collection agencies.
Providing sound, knowledgeable financial advice.
Establishing a budget that works with your income and expenses.
Establishing new financial habits that can help you avoid a future financial mess.
When debt management services are included as well (such as settlement and/or consolidation), it can also:
Reduce or get rid of interest on debts.
Waive or reduce late fees and over the limit fees.
Decrease your total monthly payments to a manageable level.
Allow more time to pay back your debts.
If you feel that you are having a hard time dealing with your debt situation, credit counseling is definitely worth considering. Trained professionals can help put the situation in perspective, and help develop a course of action to get your finances back on track. But, it is not the only option and may not be the best one for your situation.
An alternative to consider is negotiating with your creditors to reduce the principal balance instead of working on a lower interest and longer payment term. You could save years and thousands of dollars in interest by attacking the principal balance with debt settlement.
The best way for you to handle your debt problems is to research all your options before you make a decision. Talk to a credit counselor, debt settlement company, debt consolidation lender and even a bankruptcy attorney before you decide how you want to attack your debt problems.