What is Credit Counseling? Credit card counseling is a service that helps people to repay their debts by educating them about budgeting, credit, and financial management.

It is very simple, once you have a credit counselor, he/she will examine your overall financial condition. Several items are taken into account when assessing your financial condition. These items are

1. Total amount you owe.
2. Interest rates on any loan or credit card accounts.
3. Your minimum credit card payments.
4. Other payments you make like child support, medical, insurance, utilities, etc.
5. Total monthly household income.

After the evaluation, the counselor creates a repayment plan based on your budget. That plan is then sent each of your creditors for their approval. Once the creditors agreed to the plan you start making payments to the credit-counseling agency for your debt settlement which the counselor then distributes to each of the creditors as planned.

Now, it can be difficult to translate how long it will take to become debt free. It will depend mainly on the size of your debt and how much your pain on a monthly basis. Usually a counselor will design your plan so that you can be debt free in 2-4 years. One thing is for sure, most mainstream creditors prefer to work credit counseling services because they did most of their money back, which they would not if people were forced to file bankruptcy.

With the new bankruptcy laws it may be difficult to qualify for bankruptcy. In the end, it is up to you if you do credit card counseling, debt consolidation or bankruptcy.

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Tags: Credit Card Counseling, Debt consolidation, debt counseling

This entry was posted on Thursday, September 11th, 2008 at 12:29 am and is filed under Business, Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.