What is Debt Counseling?

09-Aug-2007

What can a debt counseling service do for you?

Most people find themselves overwhelmed by debt because of poor money management, unwise financial decisions or simply by not knowing the tricks of the trade. For example, consumers can save themselves hundreds of pounds a year if they take out a bank loan to pay off a crippling credit card debt.The difference in interest rates between the two is significant, and the savings can be too.

The first step in any debt counseling process is the drawing up of a debt management plan. This weighs a consumer?s incomings and outgoings, examines disposable income, reviews spending and other factors to calculate if the debts can be met. When they can, a monthly spending plan is drawn up that should be kept to. If a consumer is unable to keep up with repayments then the debt counseling may involve negotiations with creditors to agree a solution, such as reduced payments over a longer term. One of the chief benefits of debt counseling is that it is recognised by many financial institutions. Some banks and credit card companies will even reduce interest rates if a debtor proves they are following a debt management plan.

One of the biggest dangers for people in financial trouble is acquiring a bad credit rating. Continuous missed payments and bad debts are kept on record and can lead to an individual being refused credit at every turn. Debt counseling services can help prevent this by a process known as ?reaging? or ?curing? an account. This is achieved in situations where a debtor has fallen behind by making a number of on-time payments through a debt management plan to show they are back on track. The creditor will usually accept this as an indication that the full debt will be repaid, offsetting the risk of a poor credit rating for the consumer.

Debt counseling in Britain

The Consumer Credit Counseling Service (CCCS) is by far the largest debt counseling organisation in Britain. The Leeds-based charity offers a free national telephone service, ten regional centres and an online ?CCCS Debt Remedy? service. CCCS was set up by Vic Ware and Malcolm Hurlston in 1993 after they had witnessed the benefits of debt counseling in the United States. What started as a small pilot scheme in Leeds has grown into a hugely successful country-wide service with centres in all parts of Britain.

CCCS gets clients from all walks of life. Rich, poor, married, single ? over indebtedness can affect anyone. It says its typical client on a repayment plan is mid-30's, married with children with an average debt of £24,000.  CCCS isn?t the only charity debt counseling service in Britain, but it is certainly the oldest and the most popular. There are many more and countless professional debt counseling agencies as well. Professional services may be able to devote more time to a consumer?s needs and may have more influence with financial institutions, but as with choosing any professional service, the consumer should do their homework and make an informed decision.

if you'd like to look for a debt counselor, take a moment to fill out a short form, and one of the SimplyFinance's representatives will introduce you to a debt counselor who will be able to answer any questions you have. Once you're debt questions are answered, they'll give you all the advice and tools you'll need to break free from your debt.