Frequently Asked Questions About Credit Counseling

I worked as a credit counselor ever since I earned my Bachelor’s degree in Finance in 1990. Before the same company that I still work for now hired me back then, they initially asked if I was willing to travel. Apparently, their credit counselors had to move to different cities every year to gain more business experience. Of course, I was all for it, so I went ahead and signed my contract. 

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As the years passed by, I would say that I dealt with almost every kind of client out there. However, there were three most common issues that I had seen.

Splurging

The primary issue that many people experienced was buying more than what they could pay for. I often saw this mistake in individuals who never used a credit card or another payment method before allowing them to buy now and pay later. They would not know how to keep track of their expenses so that the bills would accumulate and surprise them next month.

Getting Conned By Family

Getting conned by a family member was common for senior citizens who did not know how to use their credit cards. Some of my previous clients typically lent their credit cards to their kids or other close relatives who said that they needed to buy one thing at the mall. But when the bills came, they found out that the person maxed out their card, and they would now need to pay for those.

Being Misinformed About Payment Schedules

Another typical problem that borrowers faced was their lack of information about billing dates. Ideally, everyone receives a copy of their payment schedule when their loans would get released. However, not everyone would keep it safe or write the dates somewhere to remind them when their payments were due. Because of that, they would sometimes forget to deposit money in their accounts at the right time, causing penalties to pile up.

Do Many People Accept Credit Counseling?

In all honesty, no, not many people want to hear someone tell them how they should handle their credit. That was especially true when I was fresh out of college, and I still looked like a preppy young adult. I was assigned to help some folks immediately ask for another (read: an older) person to assist them. Others would insist on leaving in fear of talking to credit counselors hurting their credits further. Despite that, I would try to calm them down and prove that I was hired because of my brain, not because of my appearance.

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1. Is Credit Counseling bad for your credit? 

 No, credit counseling will not be able to affect your credit score adversely. The counselor will merely help you reassess your repayment process and makes things easier for you. 

2. Is credit counseling a good idea? 

 Yes, credit counseling is an excellent idea. It entails that the counselor can advise you on how to reduce your monthly payments or interest rates. Even better, they may be able to talk to the creditors on your behalf.

3. What does a credit counselor do? 

 A credit counselor is like a regular counselor who talks to people about managing their debts better and improving their financial situation. Aside from one-on-one counseling, they also offer workshops so that their clients can start planning their future actions better.

4. Who is the best credit counseling service? 

 According to The Balance website, the best credit counseling service provider is GreenPath Financial Wellness. The reason is that they practically offer everything, from student loan counseling to bankruptcy support. It is almost like a one-stop-shop for all kinds of financial counseling. They also provide free educational materials to their clients. 

5. Is it better to pay off a debt or settle? 

 Paying off debt is more recommendable than settling it. The reason is that doing the former entails that you can close that chapter of your life once you have reimbursed the money you owe to the lender. As for the latter, you will incur a debt of gratitude because the lender has agreed to reduce the full amount you need to pay, and such obligations are not payable.

6. What is the difference between credit counseling and debt settlement? 

 A non-profit organization typically conducts credit counseling to help people understand debt management. Meanwhile, debt settlement is one of the services that private companies offer – in exchange for a fee – to help people settle their debts.

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7. How long does it take to improve credit score after debt settlement? 

 Credit score improvement can take anywhere from 12 to 24 months after settling your debt. Though that seems long for some people, it is still acceptable because you will be debt-free.

8. What is the best non-profit debt consolidation? 

 The National Foundation for Credit Counseling (NFCC) has the best non-profit debt consolidation companies. They have been around for decades in the United States.

9. Why would a borrower choose to consolidate debt? 

 A borrower may choose to consolidate debt if it can reduce the interest rate or find a way to pay off their debt more quickly.

10. Why Debt consolidation is a bad idea? 

 Debt consolidation is an awful idea for people with a low credit score because the lenders may not agree to give you a lower interest rate. Worse, it may increase, thus expanding your issues.

11. What are the disadvantages of debt consolidation? 

  • The lender may not allow you to consolidate debts if you don’t have a high credit score.
  • Even if the lender agrees with debt consolidation, they may turn everything into one big loan.
  • If you accept the new terms and are unable to pay your debts, you may lose your collateral.

12. What are the risks of debt consolidation?

  • It may not help you save money.
  • It may be challenging to be eligible for debt consolidation.
  • It may lengthen your loan terms instead of shortening them.
  • It may harm your credit score.
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Final Thoughts

Whenever you have questions about your credit, you should know that credit counselors in and out of banks could answer them for you. You need not face your issues without the proper information. If you insist on that, you may end up paying more than necessary or incurring too much debt.

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