The Dark Side of Credit Counseling
When facing serious debt problems, consumers are often advised to seek credit counseling immediately. But did you know that turning to the wrong counselor for help can cause more trouble and frustration? Why should you be cautious when choosing a credit counseling agency?
How Credit Counseling Works
First, let’s discuss how credit counseling works. A credit counseling agency negotiates with creditors on behalf of the borrower. A credit counseling agency can ask for a lower interest rate or adjustments in your fees to make repayment easier for you. Most agencies have built partnerships with different lending companies so it’s easier for them to negotiate. In exchange for their services, some agencies charge monthly fees for as low as $10 to as much as $100 or more.
In extreme debt cases, a counselor may advise debt consolidation or debt settlement as possible solutions. Nevertheless, a reliable credit counselor should not focus solely on these two methods of debt reduction. More importantly, a credit counseling agency should help a person address the root of the problem. It should be able to teach about correct financial management strategies to help a client stay away from debt problems permanently.
The Dark Side of Credit Counseling
Unfortunately, many consumers fall victims to credit counseling agencies that take advantage of their financial situation. Some agencies actually charge expensive rates for their services. Some of them may insist on debt consolidation loan as the best solution to the problem. The unsuspecting client may agree to be part of a debt consolidation program, not realizing that it would bring more pain and trouble. What is the danger in signing up for a debt consolidation program?
Some consumers found themselves stuck in deeper debts after getting a debt consolidation loan. The reason? Their monthly interest rates unexpectedly increase right in the middle of their repayment. Under a consolidation program, a credit counseling agency may also volunteer to submit your payments to your creditors. However, instead of submitting your monthly payments, an agency can actually withhold your payments and not pay your creditors until the deadline. Many fake credit counseling agencies also charge hidden fees that can only add up to your burden.
These agencies don’t really care about your debt problems. They’re only after their own interests – and that is to make profits from your debts. Many consumers were forced to drop out of a debt consolidation program because they’re not making any progress. After resorting to debt consolidation, they had to file for bankruptcy as a last resort for their problems.
Don’t let the same thing happen to you. Before signing up with any credit counseling agency, carefully examine its background and reputation. Check from the Better Business Bureau if the agency has had complaints in the past. Even so-called “non-profit debt counseling organizations” can be a fraud. If you don’t take time to do your research, you can end up as a victim of these predators. Therefore, do your homework and save yourself from the dark side of credit counseling.
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