You likely have heard the TV commercials about non profit credit counseling services. What exactly does that mean and how can they help you get out of debt?
First let’s clear up the confusion around the term “non-profit”. Non-profit does not mean free which is commonly what people believe. Non-profit does mean low cost since any non-profit company does not have to pay taxes and therefore is regulated by the government. So therefore the fees are low and in the case of credit counseling agencies, they are tightly regulated.
So how do these companies help you get out of debt?
Credit counseling agencies work closely with their clients on monthly budgeting and derive a personalized plan for you that results in your ability to consolidate your bills with reduced interest rates and fees. You pay the credit counseling agency then they pay your creditors every month for you. This makes it easier for you to remain within your budget and ensures all your bills are paid in a timely manner.
So think of credit counseling agencies as a way to reduce your payments, remain on a budget, and a financial resource you can use for advice and information while you are on the credit counseling program.
Every budget is different but most credit counseling agencies try to get their clients debt free in 3-5 years. Without the credit counseling program most people are stuck with high interest rates and multiple late fees making the debt repayment process seemingly impossible.