When Should You Go for Debt Counseling? | debt consolidation

Debt counseling may be needed or required if you answer yes to any of these following questions.

1. Are creditors beginning to hassle you because you have missed a few payments?
2. Do you anticipate any financial hardship in the near future?
3. Are you current with your account, but afraid of falling behind because of the current economic situation?
4. Are you thinking of filing bankruptcy? The bankruptcy law changed in 2005 making it mandatory to undergo credit counseling before filing bankruptcy.

A debt counseling service can help you in paying off your debts. The counselors can negotiate repayment terms with creditors easily. They may even be able to negotiate a lower interest rate and wave past late fees as well as negotiate a re-age of your past due accounts to a current paid-as-agreed status.

Some creditors will re-age past due accounts if you agree to enter a debt-workout program or debt-management plan. Once enrolled in a debt-management program, creditors typically charge lower interest rates, stop charging late fees and re-age the account, bring it current. Be careful! Only sign up with a debt management company that you can trust. There are thousands of credit-counseling and debt-consolidation companies looking to make a quick buck by preying on stressed-out, financially vulnerable consumers. Some companies are guilty of shoddy service and sky-high fees and others are huge scams.

Paid-as-agreed is a bit of slight-of-mouth. Paid as agreed does not necessarily mean paid WHEN agreed, but just “as” agreed. And after all, you are paying as you agree to in this negotiation, so it is a perfectly legitimate interpretation of the phrase, “paid as agreed”.

You do need to understand that a comment stating that you are making payments for an account through a debt consolidation agency will appear on your credit report. The comment will stay on your report until the account is paid in full. However, such a comment will may not hurt your credit score with some companies.

It really depends on the creditors. Some creditors may view a borrower who is enrolled in a debt settlement program as too high a risk to approve new credit. Whereas, other creditors might view it as a positive step, that you are taking responsibility of your own unmanaged finances and are serious about paying off the debts.

The length of time it will take you to get out of debt depends on how much debt you were in. It will also depend on how much you pay for months on those debts. The more you can pay per month for less time it will take to get out of debt. On average, you could be out of debt and 2-4 years.

You also need to understand that many creditors will work with credit card counseling services because it saves them time and money. They will also get a fair portion of their funds back through the service, which they would not get back if the consumer were forced to file bankruptcy.