What A Certified Credit Counseling Agency Can Do For You
Although more people have been turning to certified credit counseling agencies in recent years to help them with their financial woes, only a fraction of people who could benefit from credit counseling actually use those services. Credit counseling agencies can be useful in a number of ways that people may not expect. Here is a closer look at what credit counseling services can do for you.
Provide Confidential Consumer Credit Counseling Consumer credit counseling services provide a total overview of your financial situation. During the counseling session, a certified credit counselor reviews a person’s total income, expenses, and debts. Toward the end of the session, the counselor will identify areas that can be improved on and make recommendations to help the individual make more appropriate financial decisions. Counseling sessions can take place online, over the phone, or in-person.
Review Your Credit Report Your credit score will impact your ability to buy a car, take out a mortgage, borrow money, rent an apartment, and more. A credit report can be obtained for free from AnnualCreditReport.com, providing a catalogue of the financial transactions and obligations that contribute to your credit score, including mortgage payments, medical bill payments, credit card payments, student loan payments, and, of course, outstanding debt. It is important to review your credit report for accuracy, ensuring that your credit score reflects your actual financial situation. However, this information won’t help you unless you understand the report. A certified credit counselor can review your report with you and help you interpret its information, allowing you to verify or challenge what is stated in it.
Help You Save Money Instead of Live Paycheck to Paycheck When every penny you earn is spoken for before you even receive your deposit, you and your family are vulnerable to any financial emergency that comes along – car breaks down, an uninsured family member needs medical attention, you or a partner loses a job, and so on. If you are struggling to cover all of your bases every month, credit counseling agencies can help you manage your finances so that you’re living within your means and able to set money aside every month for savings and unforeseen expenses.
Protect Your Retirement Funds In an effort to pay off debt, some people start prematurely pulling money from their retirement funds. Not only does this incur steep penalties for early withdrawal, but preventing the investment from maturing in the account means significantly reduced future savings. By taking active steps to work with a credit counseling agency to manage debt, individuals are not only improving their current quality of life but protecting their futures as well.
Enroll Individuals in Debt Management Plans
Sometimes the educational aspects of credit counseling are not enough to help people wriggle out from beneath heavy debt. Instead, at the end of a credit counseling session, a certified credit counselor may recommend enrolling in a Debt Management Plan. To qualify for a Debt Management Plan, an individual must be behind or in danger of falling behind on payments, only be able to make minimum payments every month, or face a situation that will make payments more difficult. While an individual is enrolled in the program, the credit counseling agency will work with creditors to lower monthly payments. Clients make a single payment to the credit counseling agency, which disperses the appropriate amounts to the creditors. Debt Management Plans have a few distinct advantages: Lowers Bill Payments Credit counselors may be able to facilitate lower monthly payments because within a Debt Management Plan, credit counselors will work with creditors that may be able to lower interest rates and waive late fees. Shortens the Time It Takes to Pay Off Debt Paying down a large amount of debt by yourself may take 10 years or more. However, by working with a credit counseling agency and following a structured Debt Management Plan, debtors can pay down their loans in 3-5 years. Ends Collection Phone Calls The constant phone calls to your house and your family members can add even more stress to the situation. However, by enrolling in a Debt Management Plan, calls will end within a couple months of successfully following the program.
Provide Housing Counseling Credit counseling agencies offer 3 types of housing counseling: foreclosure prevention counseling, pre-purchase counseling, and reverse-mortgage counseling. Foreclosure prevention is for anyone
who is either currently facing foreclosure or is worried about falling behind on mortgage payments. This session helps people understand the foreclosure process, the options they have if they are in danger of losing their homes, tips for working directly with mortgage lenders, and provides participants with a personalized budget and plan of action.
For many people, a home is the largest, most impactful purchase they will make in their lifetimes. Before buying a house, particularly for first-time buyers, pre-purchase counseling can help you understand what you can afford to purchase, the type of mortgage that would best suit your situation, what interest rate you can expect, the loan application process, the price of closing costs, and expenses you can start preparing for as a homeowner. Reverse mortgage counseling is required for anyone pursuing a reverse mortgage. Reverse mortgages are a type of home equity loan that allow homeowners to take out money against the value of their primary residence. Unlike other home equity loans, though, borrowers do not have to repay the loan until they sell or move out of the home. Often, the sale of the home will be used to fulfill repayment. Available to people aged 62 years or older, these loans allow individuals who have built up equity in their property to receive a steady income while living in their homes. During a reverse mortgage counseling session, participants will learn about the fees and costs associated with reverse mortgages as well as how they are able to receive and spend the money they gain from the loan.
Provide Bankruptcy Counseling Credit counseling agencies can provide 2 types of bankruptcy counseling: pre-filing bankruptcy counseling and pre-discharge bankruptcy education. Before filing for bankruptcy, the government requires individuals to participate in financial counseling so that they understand all their options prior to filing for bankruptcy. This counseling is designed to help individuals understand their financial situation and determine if there are other suitable options for eliminating their debt. At the end of the counseling session, the participant will be awarded a certificate of completion.
Before your debts are discharged, the new bankruptcy code requires you to attend pre-discharge bankruptcy education (also called post-filing debtor education). This class provides information on how to plan a budget, strategies to manage money, and ways to use credit wisely. As with pre-filing bankruptcy counseling, participants will receive a certificate of completion afterward.
Credit Counseling Agency Limits While credit counseling agencies can help individuals with a wide range of financial issues, there are a few services no certified credit counselor may legally provide: ▶ Make financial loans: Credit counseling agencies are not banks or lending institutions, so they cannot make or buy loans. ▶ Provide legal advice or opinions: For legal advice (such as regarding bankruptcy or foreclosure), debtors need to consult with an attorney. ▶ Help debtors file for bankruptcy: While credit counseling agencies will provide pre-filing bankruptcy counseling, the act of filing for bankruptcy is another legal matter that will require the assistance of an attorney. ▶ Make corrections or remove information on a credit report: If there are inaccuracies on a credit report, credit counseling advisors are able to guide clients through the process requesting a correction. However, if there is a damaging, but factual, item on a credit report, a client must wait the state-mandated statute of limitations (typically 7-10 years) before it is removed. Advantage CCS is a non-profit financial counseling firm that provides Debt Management Programs, bankruptcy counseling, housing counseling, financial education, and budgeting services. If you are struggling with debt, contact a certified financial advisor at Advantage CCS.