Credit counseling is the process of educating individuals about finance related issues so that they can make the best possible choices. This is important because of the existence of asymmetric information. Individuals at time may have very little knowledge and hence may not be able to make better decisions or might be exploited by others.
Counseling can be taken for either preventive or curative reasons. The main objective is to provide clients with supportive environment and for the long term avoiding the cases of bankruptcy. Many counseling services are low-cost or for free. The idea behind counseling is that at times seeking help from others can make all the difference especially when others are expert in a specific field. Just like before making career choices, it is always recommended to visit a career counselor, before making financial decisions it is always recommended to visit a credit counselor. However, most people only consider counseling when in debt even though counseling is open to everyone who is stressed about financial issues.
Some of the signs that signal that you might need credit counseling are, you are borrowing too much money, you are taking multiple loans, you have lower cash in hand for day-to-day expenses, you’re continuously asking for increased credit limits on cards or you’re using way too many credit cards.
Some scenarios when you can visit a counselor can be for instance, when you are unable to make mortgage payments or credit card payments. The counselor can come up many possible solutions or maybe alternatives. They can also get debt consolidation done for you at good terms. In other case, you if you have been turned down for a consolidation loan you can take the advantage of debt management that is arranged by your counselor, which has the benefit of lower payments on the existing loan.
In addition to this, a credit counselor can guide you on using financial calculators and formula’s in order to enhance your knowledge. If you are considering purchasing a home or any other long term asset a credit counselor can provide pre-purchase counseling. At times, the counselor has knowledge about which property is better to invest in.
Most importantly, when you are considering bankruptcy it is highly recommended that you take counseling. Since it is a long process with many pros and cons, the counselor is in the best position to take that decision for you. Counselors can also help you with all the paperwork involved in the bankruptcy process. If In some rare cases, if you are “judgments prove” or the debt is “time-barred,” you may be not able to take any best-suited action by yourself. A credit counselor can help you keeping in mind your situation. Moreover, in extreme cases counselors can prevent repossession of assets where possible by negotiating with creditors.
Credit counselor can help you in other numerous ways to get you out of debt. At times counselors set realistic plans for you keeping in mind your resources, strengths and limitations. They can also develop a budget for you. Both these things will keep your expenses in control while a sufficient level of cash will be available to you at the end to pay off your debts thus keeping you out of danger. Most clients that need help with obtaining a reverse mortgage, repaying debt find the best help from counselors. The counselor can also study your credit report in order to give you advice on how to further improve your credit score so that borrowing money becomes an easy task. For instance, they can also provide you with your FICO credit score which is the score that lenders asses in order to determine whether to extend credit or not. Counselors can tell you all the tips and tricks that can be used to get a favorable result. Counselors can also negotiate better with creditors to come up with debt settlement or debt consolidation. Since they will review your financial position and will develop a plan that suits you based on your income and expenses.
Briefly, counseling can turn out to be very useful. Usually when a person is in debt he/she may not be able to take the best decision due to the pressure but the counselor may asses all the things better and come up with providing acceptable living standards to you while making sure you’re repaying your debts. Thus, allowing you to get on with your life. All this can work if you find an honest, experienced counselor and also put in your trust in him/her by disclosing all your asset and liabilities honestly. Most importantly, if your creditors consider the counselors proposals favorably the result can really be beneficial for all the parties involved.
