Credit Counseling Services
Payday loan lenders are required by CFSA (Consumer Financial Services Association of America) to inform their clients of two important things. First, that payday loans may be an honorable way to meet emergency financial needs but it is not a long-term solution to a person’s financial woes. And second, that a person who has persistent financial problems may benefit from credit counseling services. Such services are offered by credit counseling agencies. So, how exactly does a counseling agency help a person who is weighed down with debts?
A credit counseling agency helps a person solve his financial problems in two ways. The first is that the agency will structure a way for the borrower to settle his present debts. And the second is that the agency will help the person prevent future financial problems.
In helping a person settle his debts, the credit counseling agency negotiates with the person’s creditor. The agency intends to accomplish three goals during the negotiations. First is that the penalties and late fees may be waived. This will certainly reduce the amount owed by the person. Second is that the term of the loan may be extended. When the term is extended, a person may have more time to find means to settle his debts. Also, a loan with a longer period term meant lower monthly dues. And the third goal is that the interest rates may be decreased. Lower interest rates meant lower and more affordable monthly payments.
The credit counseling agency may also advise the client to start a debt repayment plan. In such a plan, the set-up will be that each month, the client will pay a certain amount to the credit counseling agency. This amount will be then paid to the client’s creditors. This debt repayment plan is usually done if the biggest creditor is a credit card company. This is because most counseling agencies are primarily funded by credit card companies. But before a client plunges ahead with the debt repayment plan, he must carefully analyze the monthly payment being suggested by the counseling agency. He must be critically honest of himself and decide whether he can afford the monthly dues or not.
In helping a person avoid future debt problems, the counselor assigned will provide advice and educational materials. The advices and materials will be all about budgeting and money management. The client is informed, guided, and inspired to do his budgeting. He is shown ways on how to manage his finances better. And he is encouraged to foster the attitude of saving money.
Tags: budget, Credit Repair, Bad Credit, Money Lenders, Debt
