National Debt Counseling

If you are drowning in debt and unable to make even your minimum payments, bankruptcy can seem like a better option than facing the constant phone calls and the possibility of being sued for unpaid debts. Yet, no matter how much credit card debt you have, there are other options to consider before taking such a drastic measure that can have lasting effects on your credit score. National debt counseling is one service that many desperate consumers are turning to in order to avoid bankruptcy.

When you decide to go with a national debt counseling agency to assist you in paying down your debts, the very first step they will undertake is a thorough examination of what debts you have, what the interest rates on those debts is, and how far behind you are in your payments. Once they have a full listing of your accounts, they then examine your income as well as how much money you pay for your living expenses. After all of this information is gathered and examined, the credit counselor will formulate a debt management plan, also known as a DMP. This plan is then sent to your creditors for approval.

Once the creditors agree to the DMP, you then begin to make one payment to the consumer credit counseling service, often for much less than what the combined minimum payments on all of your accounts was, and they disburse those funds to your creditors. As long as you are on the program, you cannot access those lines of credit, but you are also no longer accruing many fees for late or non-payment.

While many national debt counseling services contend that they are not for profit agencies, there are usually fees associated with using the service. Depending on the company, how they collect those fees can vary. Some will use your very first payment to cover the fees for their services while others will take out a flat fee from every payment. Be sure to avoid any company that tries to charge you for simply inquiring about their services. You shouldn't pay anything to the company until you have negotiated a DMP and are making payments to your creditors.

One of the major criticisms of consumer credit counseling services is that they do not provide a service that you cannot perform yourself. It is true that you are within your rights to negotiate with your creditors on your own, yet there are advantages to going through a consumer credit counseling agency instead. First, these agencies often have experience in dealing with creditors and can often negotiate a better deal in many cases. Also, many consumers like the idea of making one combined payment every month rather than several payments to many different creditors.

Dealing with a large amount of debt can be overwhelming, but before you consider bankruptcy, look into consumer credit counseling services that can help you negotiate better terms with your creditors and assist you in making headway in paying off your debts.