Discover why most consumer credit counseling programs just simply don't work
This brief writing will enlighten you to some of the truths about consumer credit counseling programs. These are the issues that turn in a drop out rate of in some cases over 80% of the people enrolled in these programs. People should be conscious of these facts before they get themselves into a online consumer credit counseling program to ensure themselves they are deciding on a smart financial decision.
1. The vast majority of the online consumer credit counseling firms are created and funded by the actual credit card companies themselves. They are nothing more than a middle man for the credit card company to collect the debt amount owed.
2. The online consumer credit counseling firms work for and represent the credit card issuers; they do not work on behalf of the debtor. The credit card organizations orderto the credit counseling company the monthly minimum payment that is required and the APR. There is no compromising at all on this.
3. The online consumer credit counseling establishments can lower the APR, however they can't actually lower the original balance. The median APR on one of these programs is around 12% which is more in the middle than actually being very low. By not lowering the original balance they are not truly a method of debt relief, this is just an sped up payment program.
4. You will wind up actually putting out more than the principal debt amount, due to the monthly fees, APR and lowered monthly payments which drastically increases the amount of time you are going to be stuck in debt.
5. It can have a brief bad impact on your credit score/report and is made a record to the public on your credit history, during the time you are in the program.
6. Attaining a home loan while on a online consumer credit counseling program becomes undeniably complicated, almost impossible.
7. Here is the number one reason people fail and read carefully. If you fall past due only one payment while on a online consumer credit counseling program you will be booted off and the creditors will not allow you to sign into another program for up to a year. Which will put your bills right back to where they were before, high interest and all. This is the number one factor why over 75% of the debtors enrolled in these programs fail out.
I mean think about it for a second. They place you into a online consumer credit counseling program that may be up to 5 years or more. We all know life has its good times and its bad times. If you find it extremely hard to be on the program in the first place you will fail out. Any unforeseen financial problems as big or small as they may be can contribute to you falling behind just one payment and getting kicked out of the program. You need to very seriously think about how unwavering your finances and income security are before you enroll into a online consumer credit counseling program to evade being part of that 80%. The bottom line is debtors with a large amount of debt such as $20,000 or more should lean more towards debt settlement than credit counseling. Credit counseling is better for debtors with much lower amounts of debt that do not have much of any problems keeping up with their bills in the first place. If you are seeking for a way to lower your debt and get out of debt very quickly, then credit counseling is not the avenue for you to take.
Steve Bis is a debt analyst and research assistant with the US Consumer Advocate, which primarily practices in credit card debt relief.
Published December 7th, 2007
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