The goals of debt counseling are simple. If you are not familiar with this term, you may know it as debt management or credit counseling. While it is very effective, you have to know that it is not applicable to everyone. Let us define the things that debt counseling can do for your credit situation.
First of all, this type of debt relief enlists the help of a debt expert. Commonly known as a debt counselor or credit counselor, they are part of a company that is usually funded by credit companies to encourage and assist troubled consumers to pay back their debt. Once you enroll in a program, you will be assigned a counselor that will assume coordination with creditors and collectors. That means collections calls will lessen – if not stop. You don’t have to deal with that anymore and you will have peace of mind as you concentrate on growing your funds for debt payment.
The counselor working with you will help you analyze your finances and debt list to find out how much you can afford to set aside for your debts every month. The goal is to arrive at an amount that will not compromise your basic necessities while giving you enough for your credit obligations. The debt management plan or DMP that you will create should be based on an amount that you can afford to pay every month. This means the presence of a steady income is a must.
Another thing that your counselor can do for you is to negotiate with your creditor to allow a longer payment term. By stretching the length of time for paying off your debts, the monthly amount will be smaller and thus more manageable for your limited resources.
While it is not a guarantee, your counselor will try to negotiate for a lower interest rate and the possible removal of any penalty charges added to your outstanding balance. The debt counseling company should not promise you this, however. If they cannot deliver, they could be in violation of the false promises prohibition in the TSR or Telemarketing Sales Rule.
Lastly, and possibly the best thing that you can get from this debt relief program is the fact that your counselor will educate you on financial and debt management. They will teach you not only how to pay off your debts, but also how to maintain a debt free life.