Amidst today’s tough economic times, consumers are increasingly finding themselves unable to meet their financial obligations. Sudden illness or injury, layoff, and pay cuts can wreak pecuniary havoc on the best people. With overall unemployment and underemployment rates at record highs, folks are seeking professional assistance just to maintain modest standards of living.
Declaring personal bankruptcy has been the traditional means of escape for those overwhelmed by excessive debt. Expensive legal fees, loss of valuable property, and severe credit damage for up to a decade are all major drawbacks of filing bankruptcy, however.
Rather than deal with their financial problems in such a formal, public manner, many people opt to simply ignore creditors and hope their problems magically disappear. Wage garnishments, adverse court judgments, property liens, and subjection to harassing collection efforts are the likely outcome to this course.
Thus, an age-old question for humankind has been “How do I resolve an inability to pay my debts?” Fortunately for today’s debtors, new alternatives have emerged that offer positive outcomes.
Enter credit counseling
The credit counseling profession is the financial world’s latest answer to the above dilemma. Unlike creditors and many courts and attorneys, ethical credit counselors have all concerned parties’ best interests at heart when helping clients resolve their financial problems. Moreover, competent credit counseling agencies and personnel provide a broad range of credit-related services designed to ensure that those they serve do not fall prey to avoidable economic hardship in the future.
This is the primary service that credit counselors offer. By negotiating with a client’s creditors, they are able to obtain reduced interest rates, extended repayment terms, or even principal balance reductions. The client then makes a single monthly installment based on the reduced debt load. These funds are typically paid directly to the credit counseling service for further distribution to creditors. Not only is the debtor’s monthly outgo substantially lowered, but his or her credit rating is preserved while he or she saves money.
Helping clients identify the specific spending patterns that got them into trouble in the first place is another key service that credit counselors offer. Counselors help debtors avoid future financial difficulties by imparting proper budgeting skills and heightened awareness of all aspects of debt.
Repairing the damage that prior bad spending habits have caused is a necessary service that credit counseling professionals provide. Counselors frequently have working relationships with or knowledge of prospective creditors who are willing to give credit-impaired borrowers a second chance.