Debt Consolidation

This concise article will reveal to you some of the problems with credit counseling programs. These are the facts that result in a failure rate of in some cases over 80% of the debtors who enroll themselves in these programs. People should be aware of these facts before they get themselves into a credit counseling program to ensure themselves they are deciding on a sound financial move.

1. A great number of the consumer credit counseling companies are started and funded by the actual credit card issuers themselves. They serve as a sort of middle man for the credit card issuers to collect the debt amount owed.

2. The consumer credit counseling companies work for and represent the credit card issuers; they do not work on behalf of the debtor. The credit card organizations stateto the credit counseling company the monthly minimum payment requirement, and the interest rate. There is no middle ground at all on this.

3. The consumer credit counseling companies will lower the APR, however they cannot actually lower the original balance. The standard interest rate on one of these programs is around 13% which is more in the middle than actually being a low interest rate. By not reducing the original balance they are not really a form of debt relief, this is just an sped up payment program.

4. You will end up actually paying more than the original debt amount, due to the monthly fees, APR and reduced monthly payments which drastically increases the amount of time you are going to be stuck in debt.

5. It can have a short term adverse impact on your FICO credit score and is made a record to the public on your credit history, during the time you are in the program.

6. Getting a home loan while on a consumer credit counseling program becomes very hard, on the edge of being impossible.

7. Here is the kicker and read carefully. If you fall past due only one payment while on a credit counseling program you will be booted off and the credit card companies will not allow you to sign into another program for a year. Which will put your bills right back to where they were before, high interest and all. This is the reason why upwards of 75% of the clients enrolled in these programs fail out.

Sit back and really think nice and hard about this for a sec. They put you on a credit counseling program that may be up to 5 years or more. As everyone knows or will come to know life has its good times and its bad times. If you find it pretty tight to be on the program in the first place you will fail off. Any volatile financial problems as little or large as they may be could contribute to you going past due just one payment and getting kicked out of the program. You need to sincerely think about how unwavering your finances and income security are before you enroll into a online consumer credit counseling program to avoid being part of that 80%. The bottom line is those individuals with a considerable sum of debt such as $20,000 or more should really lean more towards credit card debt settlement than credit counseling. Credit counseling is more reasonable for individuals with lower sums of debt that do not have much of any problems staying current in the first place. If you are seeking to reduce your debt and get out of debt fast, then credit counseling is just not for you.

Steve Bis is a debt analyst with the US Consumer Advocate, which practices debt relief.

- Steve Bis

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