The saying goes that something which cannot continue, won’t. Many consumers experience this in the form of ever increasing consumer debt levels, which can sometimes grow unchecked until they reach an unbearable point. As the burden becomes too great, one resource available to a debtor is debt counseling. There are several different types of debt counseling, and each has its relative benefits. Whether they are right for a particular consumer depends on the circumstances.
One type of debt counseling is provided by non-profit counseling agencies. These organizations survive off donations or grants, and provide free or low cost counseling for consumers who find themselves facing too much debt. In many cases, using these agencies is a prerequisite to filing for consumer bankruptcy. These agencies are primarily educational in nature and they will help somebody drowning in debt to take an objective look at their financial situation, determine possible routes to dig out of debt, and provide general advice about basic money management. Consumers can find a list of pre-approved consumer credit counseling agencies in a particular state through the Department of Justice’s website. The advantages of this type of debt counseling program is that it is often free, it meets the requirements for counseling before declaring bankruptcy, and it does not directly affect your credit score.
A second type of debt counseling is for-profit debt management services offered by a number of businesses. This type of counseling is provided for a fee by professionals who review a consumer’s debt situation, make recommendations, and then work with the consumer to implement a plan to get debt under control. Some of these programs involve an agreement to take one check from the consumer every month and divide that check up amongst the various debts that are due. Or it might involve coming up with a personalized plan for paying down debt which the consumer then implements on their own. The advantage to this type of service is the personalized efforts and insight, as well as the knowledge that the debt counseling service is your hired consultant.
A third type of debt counseling service is a for-profit debt settlement company. These groups differ from the others in that they will directly contact a consumer’s creditors and attempt to negotiate better deals. The benefit of this type of service is that they will often succeed in negotiating reductions of the amount owed, but this comes at a price. Although these agencies will remove the unpleasantness of interacting with a creditor, they also carry a major drawback, because their efforts to renegotiate the terms of the debt will almost always be reported on your credit report for years to come.
Any type of debt counseling help can make it easier to confront an out of control debt problem, but not all debt counseling programs are right for all people. When in doubt, a non-profit and free counseling service can be the right first step, and if those services are not enough you can move to credit management and debt settlement services if they are right for you.