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Consumer Credit Counseling

There are a numerous options for consumers who want to start getting their finances under control after accumulating large amounts of debt, which could inevitably lead to credit problems further down the road.

Consumers who are in control of most aspects of their finances, but still feel like they could use additional help managing their debt burden, could certainly benefit from the assistance of a consumer credit counseling service.

With a consumer credit counseling service, consumers enroll in a program that will educate them about the inner workings of their monthly finances, putting them in the driver’s seat to fixing their current credit situation with a solid debt management plan.

It will also put them on the road to a healthier financial future, since they will apply their newfound financial knowledge to make better decisions going forward and to avoid their previous fiscal mistakes.

Unfortunately, unlike other debt management methods, consumer credit counseling does not allow consumers to cut any of their debt, or even reduce their interest rates on current balances. They still have to pay off the entire amount of their outstanding debt. Consumer credit counseling simply teaches consumers methods that will help them improve their money management in the future, which will free up cash to pay down their current debt levels.

Consumer credit counseling services can also help consumers learn how to set a monthly budget that will work for their personal situation that they can adhere to. Tracking their monthly financial incomes and outflows will allow consumers to cut back on unnecessary expenditures and apply the money they save to paying down the outstanding debts that forced them to seek consumer credit counseling services in the first place.

However, as with most debt management options, consumer credit counseling does have a few drawbacks. In addition to having to repay the entire amount of their outstanding debt without any decrease in the interest rate, enrollment in such a program will appear on the consumer’s credit report, even though it will have no bearing their credit score.

Enrollment in a consumer credit counseling service on a credit report can make it more difficult to obtain a loan or even an unsecured line of credit, such as a new credit card, for some time thereafter. Lenders tend to be more wary of a consumer who has run into debt problems in the past, punishing them with a higher interest rate, even if he or she has made considerable headway in repairing his or her financial situation.

A consumer who chooses to enroll in a consumer credit counseling program should carefully research both the process itself and the organization through which they will receive the help. Not to mention, carefully evaluate the negative ramifications it might have on obtaining future loans or credit cards with higher interest. Such evaluation will not only help determine whether the process is best for their current financial situation, but also for any future considerations such as car or home purchase.