Credit Counseling is the process by which consumers are aware of the consequences they might face if the mismanagement of its finances. The main objective of credit counseling is to help consumers get out of debt through lower interest rates and prudent budgeting. Interest rate is reduced by negotiating with creditors.
Credit counseling is offered by companies as an effective tool for economic planning. A credit counselor effectively assess the current economic situation, where a debtor and find the best solution for debt reduction.
The following cases can be to opt for credit counseling,
It has been observed in most cases in the following cases, consumers choose a credit counseling session.
- A debtor has decided to file for bankruptcy and wants to give one last attempt to fix your financial situation.
- If the debtor falls behind a couple of payments and looking for ways to regularize their situation may choose a credit counselor.
- If the debtor has made regular payments and credit risk, but do not be afraid, that the credit crunch may result in the immediate future, it could also seek advice from a credit counselor.
The fees charged for credit counseling
In general, fees charged by credit counseling companies depend primarily on consumer income. Rates are monthly fees and startup costs. According to industry standards, fees charged by a credit counseling company may not exceed 20% of the monthly income of the consumer.
The industry is booming credit counseling
The industry credit counseling industry is currently a USD 7 billion dollar. Over the years the industry has grown by leaps and bounds. Previously, there was very little credit counseling companies offering quality services to the population. With the increase in credit counseling, fraudulent activities have also become widespread.
Credit counseling has gained an adverse opinion
Reports have suggested that there are many companies that “fly-by-night” and let people moaning. Indeed, the FTC or the Federal Trade Commission received numerous complaints about such fraudulent companies. These can be regarded as some of the reasons are not all consumers depend on credit counseling. There have been many instances where consumers either had to give up counseling credit or have been cheated of their money.