It might sound strange but there are many reasons to avoid debt counseling. The debt counseling process has become somewhat of a minefield as commercial enterprises have become more involved. The ideal situation is where a person is helped for free to understand their financial situation and produce a workable budget and payment plan that will ease their debt burden and ensure their financial future.
Debt Counseling Disadvantages
Debts will take longer to pay off:
One of the tools that may make you want to consider avoiding debt counseling is extending repayments. What this does is to reduce the monthly payments that you are making. In many cases it is not explained that the payments will be made over a longer period and that this can mean that a higher and in some cases much higher total amount is paid back.
If you have already signed a contract then you may not be able to avoid debt counseling that could force you to pay more interest. This can make a moderate debt much larger in the total amount paid but less of a burden now when you are in financial difficulty.
Many people wish to avoid debt counseling when they find out the cost of the service. There may be an upfront fee, which consists of an amount equal to your monthly repayment fee. In some cases, this may have an upper limit so you should be certain before proceeding. There may be a monthly fee for a set amount, or a percentage of the monthly debt repayments. These costs need to be carefully considered as they can amount to a significant amount and may actually make your long-term financial position much worse.
It’s hard work:
It is a common for less scrupulous companies to present the process as ‘painless’ and ‘easy’ it is best to avoid debt counseling services that make these claims. If you are having debt problems then there are only three ways to get relief. Increase your income, reduce your expenses or reduce your debt repayments. It is usually the case that you need to heavily reduce your expenses as a first step. This makes things such as holidays, pay television, memberships and entertainment the first casualties. This is not painless or easy so beware of anyone that tries to tell you this.
Debt counselor incompetence:
It is unfortunate that people find out they should avoid debt counseling with a particular service until they have been a victim of their incompetence. It can also be infuriating that you have signed away your right to claim against them when you became their client.
All debt counseling applications end in court:
There is a need to formalize the agreement with the court reviewing the proposed debt arrangement. When it comes into force, then it protects the creditors and the debtors so that all sides must accept the payments listed in the documents. In cases where one or all of the creditors do not wish to accept the application then the court can force them to accept the terms if it deems them acceptable.