What Is Credit Counseling?
For consumers who are struggling to pay their debts and make ends meet, a credit counseling service can provide information, guidance, and solutions. Credit counseling agency services include:
– Money management education;
– Budget counseling;
– Debt counseling; and
– Housing counseling (HUD-certified agencies), and referrals.
Credit counseling services will usually offer you a “debt management plan.” As part of your debt management plan, the agency will negotiate lower interest rates and monthly payments with your credit cards and other creditors. Monthly payments are consolidated into a single payment that participants make to the credit counseling service, which then disburses the funds to your creditors according to the terms of your debt management plan.
The cost of these services varies from agency to agency and according to state law, but many organizations provide counseling at no or low cost. Instead, individuals typically pay a monthly fee for participating in the debt management plan. The majority of agency funding comes from kick-backs paid by your creditors, who are receiving payments from the agency through your debt management plan.