What Is Consumer Credit Counseling

Nothing can make us feel more miserable than not being able to pay our bills or clear our debts. If you find yourself in such a situation, and if your mind is blank, without knowing what to do next, it clearly means that you will need to take some guidance from the experts.

We cannot just sit back and get into negativity, which will simply push us, further down. If your financial standing has hit the rock bottom, then you will need to take help from companies that offer consumer credit service.

History associated with consumer credit counseling services

First counseling agency was started in the 1960’s to help the clients and serve them with suitable solutions. Gradually, the demand for these agencies grew and about 1,000 agencies were set up in several years.

NFCC, a trade organization put up sincere efforts to help their clients indirectly. The association provides useful suggestions to their retail clients on several topics. The increasing demand of such agencies leads to the formation of AICCCA. This association gave strong competition to NFCC.

Difference between AICCA and NFCC

The major difference amongst the two famous organizations is that NFCC provides counseling sessions to the clients while AICCCA believes in offering debt management solutions to the customers over the telephone.

Who are in need of these services?

  • Those who are unable to get a revised repayment plan from their creditor

  • If interest rates and other circumstances put you in a situation of repaying debts.

  • If you have to pay debts beyond your affordability but desire to enhance credit worthiness.

Companies offering help to the clients

These consumer counseling services are considered as a reliable mode of consolidation. Unlike other agencies, such companies promise to provide the best quality advice to the consumers. Before providing any kind of help, these professionals will go through your income, savings, expenses, financial situation and existing debts. They closely study your case and find out the best solutions.

Professionals help the candidate in planning a budget. Besides this, they ask people to adopt changes in spending habits to make the situation better.

The creditor or the lenders do not have any intention to harm the borrower. Their main aim is to get their money back. The company tries to solve the problems between creditors and consumers by organizing a group discussion. Both the parties argue and end up with a final decision. Later, they plan out the best deal, which suits the situation. They try to increase the repayment time of the client or lower the interest rate.

Suggestions by the counselor

The company often suggests the consumer a debt consolidation plan, which is one of the best methods to fix the problem. Under this method, one could take the loan from the financial institutions to pay off the debts. This is basically a low rate plan to pay back the debt.

By choosing this solution, the client is able to prevent himself from bankruptcy, judgments and damage to the credit history. Creditors agree to reduce or eliminate the interest rate charged on debtors as soon as the debtors join such programs.

How to select a best company for advice

Various types of consumer counseling companies have been established in the past decades. Many of them are nonprofit organizations and few charge nominal fees from the client. Here are a few tips that would help you in choosing the best company:

  • Surf the internet and stay away from the companies that take larger share from the payments made by the clients. Such companies work against the principles of credit counseling. Instead of helping you to come out from the financial crisis, they push you towards dark.

  • You could ask for help from an AICCCA or association of independent consumer credit counseling agencies. Take guidance from people, who have used these services earlier.

  • Go Through the monthly statements that you receive from the company you choose.

  • Rebuilding a bad credit is certainly not an overnight task. If a counselor guarantees to do the same for you, be cautious about him. He might perhaps be running a fake agency.

  • A new law has been established for the welfare of the people. It states that no company has the right to demand money from the client unless they improve his credit record.

Try to consult an accredited company for help. Companies in this field need to be affiliated with the NFCC or national foundation for credit counseling. The standard of the company could be defined by checking whether they are featured with NFCC seal.

In the early 90’s, very few options were available for debt consolidation. A group of credit grantors formed this organization for the betterment of the public. The objectives of NFCC are mentioned below:-

  • In order to benefit retail members, NFCC controls the regulatory and legislative activities

  • The Sincere hard work of the organization could help the consumers in avoiding bankruptcy.

Before selecting the companies, check whether they are sincerely helping their clients. A good company needs to discuss every single option of financial management like bill consolidation, debt management, self repayment schemes and much more with their clients.

These agencies not only help you to pay your debts on time, but also ensure that you never move on the same track in the future. A credit advisor will look into your matter and help you personally. All the information you share with him remain a secret.

You could ask as many questions as you can relate to repayment strategy and other financial crises and clarify your doubts. An advisor would guide you on the allocation of the funds.

Companies have planned new strategies to help the client. Some of them are:

  • Classes - Classes are held on a weekly basis on topics such as how to manage spending habits and much more

  • Pamphlets – They are designed for better budget planning and are distributed to the clients

Advantages of these services are mentioned below:-

  • These services help in the improvement of the credit history. When people are able to pay their debts on time, their credit rating improves automatically. Thus, they are able to make future transactions without any delay.

  • Debt is eliminated

  • Monthly payments are lower

  • Borrowers get longer period for repayment of loans with lower rate of interests. In this way, their monthly payments are reduced and they are able to lead a better life ahead.

Such services have been able to bring accountability to the financial accounts.

Why to choose counseling over bankruptcy

Counseling is essential for those candidates, who are finding a solution for bankruptcy. Those who choose bankruptcy as the only solution could completely clear their debt without any hassle. Such people need to put their assets like house, business, car and other items at stake. Besides this, they fail to establish good credit scores for next 10 years. Hence, it is advisable to choose a credit counselor as he provides an opportunity to establish good credit scores.


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