5 Benefits of a Consumer Credit Counseling Program
There are five good reasons why working with a credit counseling service is better than battling debt on your own.
Let’s be honest. If most of us had it our way, we would always handle financial challenges on our own. Asking for help often feels like admitting defeat and sharing your finances with someone, especially when you’re having issues, isn’t an easy thing to do. However, in many cases professional help is exactly what you need to eliminate debt quickly so you can regain stability.
Enrolling in a consumer credit counseling program is often the best solution, because it provides several key benefits. Even if you could eventually pay off your debt on your own, enrolling in a program may be faster, more convenient and more cost effective. Here’s why…
#1: Get an impartial professional opinion about your best way out of debt
Nonprofit consumer credit counseling starts with a free debt evaluation by a certified credit counseling. The counselor evaluates your debt, budget and credit to see where you stand. Then they review your options for debt relief and help you identify the best one to use in your situation.
The advantage of nonprofit credit counseling services is that they don’t try to “sell” you on one solution. If it turns out you’d be better off solving your debt problems on your own, they explain what to do. For instance, if you have good credit and a reasonable volume of debt to repay, they may direct you to a debt consolidation loan.
A certified credit counselor will only direct you into a program if it’s the best solution in your situation. So, even if you don’t enroll you can still benefit just from calling for the free credit counseling session.
#2: More effective interest rate negotiation
When you have credit card balances that you need to eliminate, your first step should be to call your creditors. The goal is to negotiate lower interest rates and to see if the creditor will help you set up a repayment plan. A lower interest rate gives you a big advantage because it means more of each payment goes towards reducing principal. That’s the actual debt that you owe, rather than the interest that accrues each month.
Of course, not all creditors are willing to negotiate with you individually. This is especially true if you’ve missed payments or you only make minimum payments. On the other hand, working with professionals shows that you’re serious. Your creditors essentially give you credit for voluntarily enrolling in a credit counseling program. And that credit comes in the form of more willingness to reduce or eliminate your interest rates.
That’s what happened to a credit counseling program graduate named Ronnie. While one of his creditors was willing to negotiate with him directly, most of the others weren’t. However, once he enrolled in the program, his creditors got on board.
#3: The program reduces your total monthly payments by 30-50%
Consolidated Credit has data to prove that our credit counseling programs reduce clients’ payments by 30-50%. Here are just a few examples:
Marie from Pierre, SD
This has been such a great service and a great experience. Thank you!
Where she started:
- Total unsecured debt: $41,277.00
- Estimated interest charges: $24,133.79
- Time to payoff: 14 years, 11 months
- Total monthly payments: $1,651.08
After DMP enrollment:
- Average negotiated interest rate: 3.66%
- Total interest charges: $3,008.17
- Time to payoff: 4 years, 10 months
- Total monthly payment: $764.00
Jacqueline from Monticello, MN
Consolidated Credit helped us to see a light at the end of the tunnel, when we had no hope left. Thank you!
Where she started:
- Total unsecured debt: $48,498.00
- Estimated interest charges: $27,960.42
- Time to payoff: 14 years, 7 months
- Total monthly payments: $1,939.92
After DMP enrollment:
- Average negotiated interest rate: 3.58%
- Total interest charges: $5,996.46
- Time to payoff: 4 years, 4 months
- Total monthly payment: $1,042.00
As you can see, credit counseling programs allow people to pay off debt faster even with monthly payments. That’s part of the benefit of reduced or eliminated interest rates. Since more of each payment applies to the principal, rate reduction significantly accelerates how fast you can reach zero. Most clients typically complete the program 36-60 payments, so expect to be out of debt in less than five years.
#4: A clean break from credit dependence
Using credit cards can be addictive. Once you use plastic to cover daily expenses or buy what you want when you want, stopping can be tough. You must learn how to put off purchases until you have the cash to pay for them. That’s not always easy to do on your own.
This is another reason people struggle to eliminate credit card debt without outside help. Even as you pay off debt or consolidate it with a loan, you keep charging. As a result, you never seem to get anywhere.
When you enroll in a credit counseling program, the accounts included in the program freeze. You can’t make any new purchases on those cards until you graduate. The counseling team also helps you make a budget where you don’t have to rely on credit to cover expenses. As you go through the program, you learn to break your credit dependence.
Linda P. — Discovers It’s Not Hard to Live Credit-FreeLinda thought living without credit cards would be impossible, but with the help of Consolidated Credit and a debt management program, she developed better credit habits to break the cycle of debt.
#5: Free access to financial resources
At Consolidated Credit, our goal isn’t just to help people get out of debt; we want to ensure they stay that way. That means educating people on personal finance, from budgeting and saving to planning effectively for major life events. By helping program participants build financial literacy, it ensures they have the tools to avoid new problems with debt down the road.