So you are having trouble managing your money. Don't feel bad. Money management skills are, unfortunately,
not taught in school and must be learned in the real world. Most people only learn how to manage their finances
after having struggled to get out of debt. If you find yourself sliding further into debt, have collectors
calling you and cannot figure a way out, then it may be time to seek out the services of a credit counselor.
If you make this decision now, you can avoid filing for bankruptcy and have legal action taken against you by
your creditors.
A credit counseling service (CCS) will help you to better manage your money. They will help you to develop a
monthly budget and arrange a re-payment plan with your creditors. You provide the CCS office with a lump sum
every month which they will use to pay your creditors according to the arranged schedule. By using a CCS
program, you will be taking the first steps towards becoming debt free. Even collection agencies will stop
calling.
Enrolling in a CCS play may alleviate most of the stress and pressure of having to deal with your debts, but
it doesn't mean you can simply forget about your debts. You are still responsible for those debts which are
not included in the CCS program. You must also review your monthly statements to make sure the payments have
been received. If your CCS program also involves reducing or eliminating interest on your accounts, or waiving
late fees, you are responsible to make sure that these arrangements are reflected on your statement.
A CCS program is designed to help you to get out of debt. Some CCS programs require you to agree not to apply
for or use any additional credit while you are on their program. This only makes sense. You are trying to dig
yourself out of debt, not bury yourself further. A typical CCS program can take 48 months or longer to complete.
Some CCS agencies charge little or nothing while others charge a monthly fee. Be sure to ask up front what fees,
if any, are involved in the program.
A CCS program does not erase or fix your credit history. If your accounts were previously in arrears, the
information will stay. If you are enrolled in a CCS program, your credit report will have notations to that
affect.
Reducing Your Debt Load With Credit Counseling
CCS programs have the ability to reduce your debt load by having financing charges and interest reduced or
even eliminated. It is possible to reduce your debt load by up to 60% and becoming debt free sooner by
enrolling in a CCS program. Creditors understand that individuals who are enrolling in a reputable CCS program
are doing so to avoid filing for bankruptcy where the creditor gets nothing. Therefore, most creditors will
accept interest payments only. Lets look at an example of what a CCS program can do for you:
| Account |
Owing |
Your Time |
CCS Time |
Your Total |
CCS Total |
Savings |
| Visa |
$ 2,500 |
36 Years |
5.8 Years |
$ 10,560 |
$ 2,785 |
$ 7,775 |
| Mastercard |
3,000 |
19 Years |
6.9 Years |
5,661 |
4,076 |
1,585 |
| Visa 2 |
1,200 |
10 Years |
2.3 Years |
3,152 |
1,413 |
1,739 |
| Store Card |
700 |
12 Years |
1.6 Years |
3,289 |
700 |
2,589 |
| Totals |
$ 7,400 |
19 Years |
4.1 Years |
$ 22,662 |
$ 8,974 |
$ 13,688 |
As you can see, a CCS program can greatly reduce the amount needed to pay back your debts. In this example,
you would be saving 60% and reducing the time it takes to pay off your debts.
Car Loans and Mortgages
CCS programs only cover unsecured debts. A secured debt is any account where there is some sort of security or
collateral involved. Credit cards, for example, have no collateral and therefore are considered an unsecured
debt. Accounts such as mortgages or car loans where there is security involved are your responsibility and
excluded from the scope of the CCS program.
Car loans are considered a secured debt and not covered under a CCS program. When you borrow money to buy a car,
the lender generally holds the title to the car until the debt is paid in full. Upon default of a car loan,
most loan agreements allow a creditor to repossess your car at anytime you are in default. In order to get
back a repossessed vehicle, you will need to pay the loan in full as well as towing and storage costs. If
you foresee a default on a car loan, you would be better off trying to sell the car yourself to pay off the
debt.
Mortgages are also not covered under a CCS program. Mortgage lenders are quick to proceed with legal action
upon a default. If you think you may default, contact your lender immediately. Most lenders are willing to
work with you if they believe you're acting in good faith and the situation is temporary. If you and your
lender cannot work out a plan, contact the local office of the Department of Housing and Urban Development or
the housing authority in your state, city, or county for help in finding a housing counseling agency near you.
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