This short writing will reveal to you some of the problems with consumer credit counseling programs . These are the issues that result in a drop off rate of in some cases over 80% of the debtors enrolled in these programs. Debtors should be knowledgable of these facts before they enroll themselves into a credit counseling program to guarantee themselves they are making a decisive financial decision.
1. Most of the consumer credit counseling companies are started and funded by the actual credit card issuers themselves. They serve as a sort of middle man for the credit card issuers to collect the debt amount owed.
2. The consumer credit counseling companies work for and represent the credit card issuers; they do not work on behalf of the client. The credit card organizations orderto the credit counseling company the monthly minimum payment requirement, and the interest rate. There is no conciliation at all on this.
3. The consumer credit counseling companies will lower the interest rate, however they can never actually lower the principal balance. The normal APR on one of these programs is around 13% which is more in the middle than actually being a low interest rate. By not lowering the principal balance they are not truly a method of credit card debt reduction, this is just an accelerated payment program.
4. You will end up actually putting out more than the principal debt amount, due to the monthly maintenance fees, APR and lowered monthly payments which greatly increases the amount of time you are going to be living with debt.
5. It can have a temporary bad effect on your credit score and is made a public record on your credit history, during the time you are in the program.
6. Getting a mortgage while on a consumer credit counseling program can become undeniably complicated, almost impossible.
7. Here is the biggest problem and read carefully. If you fall behind only one payment while on a credit counseling program you will be kicked off and the credit card companies will not allow you to sign into another program for a year. Which will put your credit card debts to where they were prior to enrolling into the program, high interest and all. This is the number one reason why over 75% of the clients enrolled in these programs fail off.
Relax for a minute and think about this. They put you on a credit counseling program that may last 5 years or more. We all know this journey called life has its good times and its bad times. If you find it extremely tight to be on the program in the first place you will fail out. Any unforeseen financial problems as big or small as they may be can contribute to you going past due just one payment and getting kicked off of the program. You need to very seriously think about how constant your finances and income security are before enrolling into a credit counseling program to evade being part of that 80%. The bottom line is those with a larger amount of debt such as $20,000 or more should really look more towards debt settlement than credit counseling. Credit counseling is much more suited for people with much lower amounts of debt that do not have much of any problems keeping up to date with their accounts in the first place. If you are seeking to reduce your debt and get out of debt in a timely fashion, then credit counseling is just not for you.
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