Credit Counseling Basics: What Do You Need to Know?

If you are struggling to manage your finances due to multiple debts, credit counseling will work best for you. Before consulting a counseling organization, you need to understand your financial obligations first. That can help you solve part of your financial problems.

Studies show that many Canadians are living on debts. As of 2018 October, the Canadian household debt was already at $2.158 trillion, an increase of 3.5% compared to 2017. If the trend continues, more people will find themselves in debt crisis.

One way of mitigating the impacts of multiple debts is by seeking counsel from reputable organizations. After reading this article, you will get to know the basics of credit counseling that will transform your financial life.

What is Credit Counseling?

Credit counseling involves issuing proper guidance to consumers who have bad credit. If the person is overwhelmed with multiple debts, a counseling agency will provide enough support to help the debtor with budgeting. The primary objective of credit counseling is to help borrowers manage their debt obligations and avoid bankruptcy.

While credit counseling aims at providing financial education to debtors, it also offers debt management tools that can help you to avoid falling into more debts. A counseling agency may also negotiate with your lenders on your behalf to exempt you from paying fees and high-interest rates.

Finding the Best Credit Counseling Agency

When looking for a counseling organization, there are numerous factors that you have to consider. First, you have to check if the agency is certified to offer counseling services. A right counseling agency has trained personnel who can offer legit financial advice.

According to the Federal Trade Commission (FTC), non-profit organizations are known to offer more trustworthy counseling compared to profit-making organizations. Also, a good credit counselor should be knowledgeable in areas such as consumer credit, debt management, and household budgeting.

You can find credit counselors in universities, credit unions, banks, military bases, and government offices. Some of these agencies offer counsel through phone calls and online platforms. However, in-person credit counseling is always the best option.

Before choosing an agency, find out if it provides educational workshops for customers. You can also check the reviews of the agency to ascertain if it’s reputable. Finally, it is advisable that you choose an agency that is accredited by the National Foundation for Credit Counseling (NFCC).

Preparation for Credit Counseling

Before stepping into an office of a credit counselor, it’s essential to prepare yourself in advance. You should take your time and gather every financial information that you might need. By doing so, the counseling session will take a short time.

Now, let’s take a look at some of the information that you have to gather while preparing for credit counseling.

• Total Income: The counselor will ask you to provide an estimate of your income. You should, therefore, look for every paycheck that shows all your income.

• Monthly Expenses: You should estimate the amount of money that you spend every month. Such expenses may include utility bills, subscription services, food, insurance policy, and any other cost that takes your money.

• Existing Debts: You need to prepare a list of all your monthly payments. Such loan payments include mortgages, student loans, car loans, and other loans. You must also specify the interest rates of these loans.

• Credit Card Information: If you have several credit cards, you need to provide the information about each card. That should include the interest rates, current balances, and due dates.

What Happens During Credit Counselling

As we mentioned earlier, you can get counsel over a phone call, online, or in-person. With in-person counseling, the interview may last for about an hour. During that time the counselor will ask you many questions regarding your financial situation. The inquiries will revolve around your income, budget, expenses, and assets.

The credit counselor will also inquire more about the source of your financial problems, a question that you must be prepared to answer. Also, you will get to explain any measure you’ve taken to solve the issues. Once you answer that, the counselor will know where to begin.

While advising you, the counselor will weigh various options that can be useful in solving your financial problems. For instance, if you have multiple credit card debts, one of the repayment strategies that a counselor may recommend is taking out consolidation loans.

Another way of reducing your debts is by selling off the assets you are not using to raise money for paying off these debts.

Finally, the credit counselor will evaluate every information you provide and give you the final verdict.

In a nutshell, let’s look at some of the services that you can get from the credit counselors.

• Preparation of a workable household budget
• Designing of debt management strategies
• Counseling of how to avoid bankruptcy
• Devising ways for managing your money
• Counseling you on loans to take and also to avoid

Benefits of Credit Counseling

Other than the services that credit counselors offer, you are likely to enjoy many financial priorities. However, the benefits may vary with a borrower’s financial situation. In brief, let’s take a look at some of the advantages.

• Reduced monthly payments
• Reduced interest rates on loans
• Elimination of financial charges
• Consolidation of multiple debts

The debt management practices relieve borrowers from financial stress, primarily when fully implemented by the borrower.

Final Word

If you are worried about your debts, you should consult a reputable credit counseling agency before becoming bankrupt. The counselors will help you to come up with an effective debt management plan (DMP) as a way of solving your financial problems.

When looking for a credit counseling organization, you must choose the agency which will act in your best interest. Such agencies include the non-profit organizations accredited by the National Foundation for Credit Counseling (NFCC).

Finding a reputable agency may seem challenging, but it’s not. You only need to consult experts like loansgeeks.com who have much knowledge and experience regarding the loan industry. With the help of such companies, you’ll get connected with certified credit counselors.