How Does Consumer Credit Counseling Work?
Consumer credit counseling (CCC) is a comprehensive program that helps individuals evaluate their current financial situation, and create a plan to pay off debt and reach attainable financial goals for the future. There are three basic steps that comprise the general credit counseling process:
First, a skilled agent will provide you with a consultation.
Second, that agent will work with you to create a plan that addresses your immediate financial concerns.
Third, your agent will help to educate you on responsible saving and spending habits.
Consultation for Consumer Credit Counseling
Since consumer credit counseling is not the best solution for every case, the first step of this process involves and in-depth financial interview to get an accurate picture of your overall financial picture situation.
During this initial consultation you will a professional will help you analyze each of your current debts to ascertain whether it can be included in the CCC process. Secured debts like property or automobile loans, along with most medical and utility bills, are not allowed into the credit counseling process. Most unsecured debts, like credit cards and personal loans, can be entered into the CCC process.
Your counselor will also thoroughly analyze all of your income and current expenses to get a good idea of how much you can afford to pay toward your debts every month. At the end of your consultation, you and your counselor will decide if CCC is right for you.
If CCC is a viable option for you, then it is time to discuss all the fees associated with the process. If these fees seem reasonable to you, you can proceed with the program. You may wish to compare the prices and terms of several different CCC services before signing with any one company.
This ensures you get the very best service at the most reasonable price.
A Consumer Credit Counseling Plan
Once you are locked into a deal partnered with your CCC professional, together you can create a plan to aggressively pay off your debts. There are several different strategies to go about doing this, and your credit counselor will help you find the best option or a combination of multiple options.
Here are two of the most common repayment strategies employed by CCC services:
- Consolidation Loan – These loans are essentially a large borrowed sum used to pay off your creditors at the same time. The money borrowed is then repaid directly to your consolidation service via a monthly amount that fits into the overall financial plan you create with your counselor.
- Debt Settlement – Using your lump sum of money as leverage, you and your counselor can choose to negotiate the settlement of your various unsecured debts, sometimes saving at up to 60% off the original amount owed.
Once your debt repayment plan is in motion, your credit counselor will work with you to change the spending habits that got you into debt in the first place.
You will map out your financial goals for the future, such as:
* Large purchases
* Educational expenses
Then you will create a budget that allows you to effectively set aside money toward these goals while still meeting your basic monthly expenses.
You will also be taught helpful financial strategies like:
* Setting up an emergency fund
* Creating a high yield savings account
These strategies will empower you to create a financial buffer for yourself that will help you stay out of debt in the months and years to come.
Consumer credit counseling works for individuals who need support in paying off large debts and who are interested in learning new habits that will enable them to become financial responsible individuals.