Will Credit Counseling Help You?
These days, more and more consumers in Nevada and across the country are struggling with credit cards and other unsecured debts such as store cards, gas cards, medical bills, doctor bills and more. If you're experiencing a similar debt crisis, you may even be seriously considering credit counseling to help you take control of debts. In fact, if you have a high level of debt and decide to pursue bankruptcy, it's now required that you go through credit counseling prior to filing for bankruptcy.
The goal of a debt consolidation or credit counseling program is to combine or consolidate all of a consumer's debts into a single, more manageable payment each month. Through the benefits of debt relief such as lower interest rates and the waiving of late fees and penalties, a debt management plan (DMP) coordinated by a credit counselor or debt counselor may be able to help consumers get out of debt at an accelerated pace and, quite possibly, save a substantial amount of money as well. How are credit counseling debt management plans (DMPs) customized for each individual? Individuals are interviewed by credit or debt counselors to determine how much in unsecured debt they have; then counselors will find out how much money the individual can reasonably allocate each month to pay down or pay off debts. Finally, based on the consumer's budget and ability to pay off their debts, the counselor has the information necessary to make proposals to each of the consumer's creditors requesting the benefits of debt relief – most importantly lower interest rates. Those creditors who agree to the proposals are added, one by one, to the debt management plan. Debt management plans can be very effective for individuals who stop using and freeze their credit cards, and stay the course on the debt management plan. By not accumulating additional debt and paying off existing debt at a lower interest rate, the process of debt resolution can be accelerated.
If you are facing a financial hardship and want to explore your debt relief options, you can get your free debt relief evaluation and savings estimate at no obligation.
How Does Credit Counseling Work?
Credit counseling agencies, through certified credit counselors or debt counselors, can provide a variety of vital debt relief services for individuals and families. This includes evaluating an individual's unique debt circumstances, budgeting, financial education, and in many cases, providing the tools to help manage finances and move toward the dream of financial independence and a future free from the burden of debt.
Debt Management Plans
Credit counseling agencies also help provide debt relief by working with debtors to establish a debt management plan, also known as a DMP. Debt Management Plans could provide debt relief by:
- Lowering monthly payments
- Reducing interest rates
- Waiving of late fees and penalties
- Consolidating or combining debts into a single, more manageable, monthly payment
- Helping individuals save substantial money and allowing you to get out of debt in less time than you could on your own if you didn't have the benefits of lower interest rates and continued to pay only monthly minimums at a higher interest rate.
Could Debt Relief Help You? Get your free debt relief analysis and saving estimate today.
Debt Relief Alternatives
Credit counseling is a proven method for debt relief that has helped many individuals and families in Nevada, but it's important to know that debt management requires discipline and restraint to avoid credit cards. It typically takes three to five years to complete the program and realize the full benefits of debt relief. On the other hand, an alternative to debt management is debt settlement (or debt negotiation), which is a more aggressive form of debt relief that could help you get out of credit card debt faster, assuming you can accumulate money in a "set aside" account which can later be used to extend a settlement offer to creditors.
With debt settlement, which is a viable option for individuals looking to avoid bankruptcy, it is interesting to note that if credit card companies decide eventually to "sell off" your debt as "bad debt" to a collection agency, creditors may get as little as 10 cents on the dollar, so it is not surprising that credit card companies may be willing to accept a reasonable settlement offer made by you or by a debt settlement company on your behalf. It is important to be aware that when consumers default on the terms of credit card agreements to set aside monies in a settlement fund, creditors may threaten or take legal action. In addition, money saved through credit card settlements are subject to federal taxation. Finally, debt settlement typically will have a negative impact on personal credit, but not as serious or long lasting of an impact as personal bankruptcy.
State Resources for Needy Families
While debt relief programs help many Americans during times of financial hardship, some people - including the elderly and those with medical needs - may have more immediate needs and require food assistance, child care help, or even help paying for utilities. To assist with their needs, the state offers such programs like Nevada Check Up (SCHIP), Nevada Energy Assistance Program, and the Head Start program, among others. To find out more about these services designed for low-income families and individuals, go to the state's homepage Benefits section.
The bottomline is, whether you choose to enroll in a debt consolidation program, debt settlement service, or even turn to the state for financial assistance, it is important to understand clearly how much debt relief can potentially save, how long it will take to realize those savings, and the impact that any debt relief program could have on personal credit and taxes. Get your free debt relief analysis and savings estimate.