On one hand, credit counseling can be a good way to resolve debt and avoid bankruptcy. On the other hand, it can be like an onion; once you remove the layers, you might cry after seeing what you’re doing.
Consumer credit counseling companies are organized for profit or not for profit. Not-for-profit credit counseling in the United States has recently been in the media and under the attention of the Internal Revenue Service (“IRS”). The IRS has cracked down on some of the biggest players in the industry. 41 credit counseling companies had their tax-exempt (non-profit) status revoked; They found that many companies did not offer the level of counseling or education required to qualify for tax-exempt status.
What credit counseling companies do (regardless of earnings status) is arrange for you to pay off the full principal balance on terms that are easier for you to meet, such as a longer repayment term and/or interest rate. reduced interest. What this means is that if you owe $10,000 and you’re paying an average of 15% interest on all your debts, you’ll still owe $10,000 but hopefully they’ll lower your interest rate to at least half your original rate and set higher payments. affordable. usually for a longer period of time. As long as you can afford the entire plan and fees, you will be out of debt at some point. Remember that non-profit does not mean free, they still charge you a fee.
Credit counseling goes on your credit report as an R7 and is viewed negatively by all credit grantors. As a result, if you’re on a 7-year payment plan, don’t count on using credit cards, getting a car loan, or getting a mortgage for the next 7 years plus the time it takes to restore your credit rating.
The origin of credit counseling dates back to the 1980s when grantors got together and created to recover money from people in debt. The new banner of consumer credit counseling at the time distanced itself from credit grantors under a friendlier nonprofit status that built trust and performed well with the public. People signed up in droves, and for-profit businesses followed soon after.
If you owe less than $10,000, credit counseling is probably not a bad idea and a good alternative to bankruptcy. However, people still fail at these plans because they take a lot of time and spend a lot of money in maintenance fees over several years.
A new entry into the debt management market has been debt settlement. Debt settlement has been a popular option in the United States, and the movement has gained momentum in Canada. Unlike credit counseling, debt settlement actually reduces the principal balance owed by you to about 40% to 70% of your original principal balance. A credit counseling service doesn’t do that, it just freezes or lowers your interest rate.
If you owe more than you can manage, consider debt settlement as an option. It’s an excellent opportunity to pay off your debt quickly while saving you a substantial amount of money without damaging your credit rating like bankruptcy would. I have seen people with $50,000 in debt totally debt free in as little as 30 days if they have the right resources. Others may take up to 36 months depending on your ability to pay off. Debt settlement companies are also an agent acting in your best interest and are not run or managed by the same people you owe in the same way that credit counseling companies are. In most cases, debt settlement companies’ fees are based on the money you save, which means they are working to save you as much as possible. See http://totaldebtfreedom.ca/ for more information on debt settlement.
