Credit counseling agency is a vital channel between your debt and your creditors.
What they do essentially is negotiate with your creditors and reduce your monthly
payments and interest burden. But, is credit counseling really that good as
it is promoted in various advertisements and campaigns? Take a look at the following
points and you might change your perception.
Credit counseling agencies are partly funded by credit card companies, and
this is not without its reasons. Whenever a person with credit card debt goes
for credit counseling, the credit counseling companies get payments for reducing
the interest rates, repayment terms and repayment amount. Credit card companies
can give incentives to credit counseling firms for not 'doing their best'.
The personal information with credit counseling agencies can be at risk, if
you don't complete the program and withdraw your relations with the credit counseling
It is rare to find a credit counseling agency with relations with all the credit
card providers and credit card companies. So, if you hold a wide spectrum of
credit card debt, chances are big that your credit counseling agency might not
have the 'right relations' to get the best deal for you. This means that for
some credit cards you won't get any professional benefits and the rationale
of paying high credit counseling fees won't justify itself.
How many of credit card debtors get benefit of credit counseling? A survey
indicated that the completion rate of credit counseling agencies is just 26
percent. What happens to the rest? Consider a situation where a credit counseling
agency has charged a huge amount initially and was not able to complete the
process, or was imposing a deal which was not at all attractive. Things can
get worse for the debtor in this situation.
In majority of the cases the credit counseling agencies takes the first payment
as their fees. So, your hard earned money goes in vain. Though, this process
is highly criticized, but it is still prevalent.
Credit counseling agencies are not with their drawbacks, the best thing is
to avoid credit card debt altogether. Good financial practices, avoiding multiple
credit cards, staying within your income levels, paying your outstanding balances
on time-- all these go a long way in keeping the credit card debt at bay. But,
if things really warrant some help, why not arrange an attorney to negotiate
your credit card debt for you?