Pros To Credit Counseling

Credit counseling is an important decision which requires much consideration. Companies which offer these services provide individuals with the information they need to better manage their financial assets. These services also work with individuals to provide debt consolidation and/or negotiation assistance to move individuals to a debt free future. In the short run, however, one's credit rating may suffer in the debt negotiation or consolidation process, so debtors must carefully consider the pros and cons to credit counseling to decide if it is the right financial move.

One of the strategies counseling services employ is debt consolidation. Debt consolidation takes all current balances, rolling them into one large loan at a lesser interest rate than the individual creditors are likely charging. Typically, enrolling in credit counseling services requires paying a reasonable monthly amount toward debt to the service instead of your creditors. The counselor then represents the client with all creditors, using this money to strategically pay off debts. The advantages and disadvantages to working with a counselor in this situation are that although balances are being paid off, consumers are temporarily suspending payments to creditors, which will result in defaulted payments being reported on their financial report, which will lower the credit score.

Another strategy used that has pros and cons to credit counseling is debt negotiation. With this strategy, the counselor will contact all creditors and inform them of the client's enrollment. Using the money paid monthly as part of the debt consolidation plan, the company will begin working with each creditor. They will negotiate the balance with that creditor and come to an agreement until all of balances have been cleared. The disadvantages and advantages of debt negotiation are similar to that of consolidation. The great benefit of negotiation is that the total amount of money due can be drastically reduced by a trained counselor; however, the client will have reports of defaulted payments on their credit report while negotiations take place.

The final pros and cons to credit counseling have to do with the cost of the service. These services do charge a fee depending upon the complexity of the client's financial situation; however, the potential savings they net by negotiating the debt typically covers their services. As a rule, non-profit counselors charge lesser fees than for-profit agencies. Debtors can also negotiate their own debts with creditors, but the counselors are obviously more experienced with this process and may yield better results.

Those who are struggling against an ever-increasing tide of bills should get assistance. The counselor can provide just the necessary service to break the cycle of debt. Debtors should also go to the Lord in prayer. "Many are the afflictions of the righteous: but the LORD delivereth him out of them all." (Psalm 34:19) There are certainly pros and cons to credit counseling. People who are about to purchase a home might not want to risk having their score temporarily lowered as a result of the process; however, the benefit of moving toward a debt-free future might make credit counseling the best option in the long-run.

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