"Cut payments in half!" The title is crying. "Consolidate your bills into one lower monthly payment!" If you receive messages like these, who are often from Credit Counseling firms. In this article, I'll explain the principles of credit counseling and to discuss the biggest problem for consumers, if any of these programs. First, let's just our definitions. The concept of "Credit Counseling" is actually quite misleading, since it has nothing to do with preserving or improving your credit. In fact, Credit Counseling is often damage your credit, an unfortunate reality, sometimes by representatives minimized. Credit Counseling is a debt management in which a single monthly payment of an organization. In return, the agency distributes the money to the creditors on your behalf at best a lower interest rate, is possible before the debt faster. Credit Counseling should not be confused with debt consolidation, debt settlement or debt cancellation. Each of these programs is due to a completely different concept of Credit Counseling. Of all available debt, credit counseling is by far the most popular, with millions of Americans participate. This means that's the best choice for most people struggling with debt? No! There are many problems with this approach. In recent years, the industry of credit counseling has been heavily criticized, neutral, such as consumer groups Consumer Federation of America. But this criticism is the mark completely. They are, in general, focus on the aggressive use of their companies, non-profit status to run in the minds of consumers, are non-profit, or even that their services are free. In fact, we had the freedom to force "voluntary" contributions, often adding up to hundreds of dollars, the steepest monthly fee. However, i'm not talking about the bad businesses have little or no real "advice", or the economy of management for their owners rich. No, I'm talking about the problems with the model of yourself. So's look at how the Credit Counseling. Let's you say $ 25,000 of debt of credit cards. Let's also assume that the average rate of interest before the registration was 20% (which is low in these days, especially if you ' ve missed payments). Your monthly payments are at least $ 500, you've been for the fight. At this rate, it's full 109 months (more than 9 years), pay debts, provided that don't miss a single payment on the track. It is a credit counseling program that promises of debt faster. But what does it do? For example, the creditor agreement, a (not always the case), the real key for the license is issued for your interest rate. In previous years, the creditors are in favor of the credit counseling and offered steep discounts on the normal interest rate. But lately, they have left the industry, and that concessions are not as good. Currently, most of the major actors, interests, a range of up to 7% too low, 18% too high. We'll use the 12% average. So, if your payment of $ 500 per month for the new rate of 12%, how long will it last? We must begin to deduct the monthly fee's. In this example, you'll use, a fee of $ 25 per month or $ 475 to $ 500 toward debt reduction. The good news is that you'll be in debt more quickly. The bad news is that there is still 75 months (more than 6 years) debt-free. But what happens if you't that, with $ 500 a month? It has tried to help with a credit counselor because you are financially to fight, right? Let's for say $ 450 a month. After deduction of the 25 United States U.S. dollars monthly, the leaves of $ 425 on the level of debt. Or: "Look at 90 months (7 years and 6 months), which is not much better as he started the month with 109. How can an adviser to then claim credit for payments in half? Good question. If it dropped to $ 250 per month, you'll not pay its debts! 12% interest rate, the debt is rising faster than $ 250 per month, reduced. It could be the lowest was $ 300 a month. But now it is 20 years to pay the debts arising from almost an improvement! To really reduce your payments in half to $ 250 in this example, the Agency to eliminate the interest! And even then there would be more than 9 years to pay the rest! For ads to be cut in half the payments are simply false. Note that in our example, we're on the assumption that "the work with a good company, low taxes and duties actually received concessions right interest rate to all your creditors. Even with the best credit counselors, it ' re still 5-9 years for a program to pay the debts. La's why Credit Counseling is usually only for people with financial problems in the short term. Consumers of financial instability in the long term problems with the regular payment of electricity needed to operate these programs. The result? Even the best statistics indicate that about 3 out of 4 decline of Credit Counseling programs before them. If you choose one of these programs, for a short period, that his duties. Here are some tips to make your choice: 1. Looking for a company which is a former guidance counselor and budget. If you want to sign immediately, without understanding your budget situation, move up! 2nd Get a copy of the contract and to read carefully before registering. Make sure that all taxes be paid. There are registration fees? "Voluntary" contributions? Monthly? Additional costs for? These costs may be hidden in a sum of money. 3rd Make sure all the creditors on your list, and not just some of them. 4th Don't be fooled by "non-profit status. This doesn't guarantee ' with a good company. Not't say the service is free! 5th Objective of finding a local business, you can in person. Check your lens with your local Better Business Bureau. Note that you must eliminate your debts, if you have a disciplined approach to your finances, budget and stick, and Don't your credit card, unless you pay new balances in full each month. Good luck for your financial future!
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