Finance Articles

This short writing will show you some of the facts about consumer credit counseling programs. These are the facts that turn in a drop out rate of over 80% of the clients who enroll themselves in these programs. People should be knowledgable of these facts before they enroll themselves into a online consumer credit counseling program to guarantee themselves they are making a smart financial move.

1. The vast majority of the online consumer credit counseling establishments are made and paid for by the actual credit card companies themselves. They are nothing more than a middle man for the credit card issuers to collect the debt amount owed.

2. The online consumer credit counseling establishments work for and represent the credit card issuers; they do not work on behalf of the debtor. The credit card companies orderto the credit counseling company the monthly minimum payment requirement, and the APR. There is no give and take at all on this.

3. The online consumer credit counseling companies can lower the APR, however they can never actually lower the principal balance. The typical interest rate on one of these programs is around 10% which is more in the middle than actually being very low. By not lowering the principal balance they aren't truly a form of debt relief, this is just an accelerated repayment program.

4. You will end up actually putting out more than the principal debt amount, due to the monthly maintenance fees, interest and lowered monthly payments which greatly bumps up the amount of time you are going to be stuck in debt.

5. It does have a momentary derogatory impact on your FICO credit rating and is made a record to the public on your credit report, during the time you are in the program.

6. Attaining a mortgage while on a online consumer credit counseling program becomes very hard, on the edge of being impossible.

7. Here is the kicker and read very carefully. If you miss only one payment while on a online consumer credit counseling program you will be kicked off and the creditors will not allow you to re-enroll into another program for a year. Putting your debts right back to where they were before, high interest and all. This is the number one factor why upwards of 75% of the clients signed into these programs drop out.

I mean think about it for a second. They put you on a online consumer credit counseling program that may last 5 years or more. As we all know the adventure that is life has its ups and downs. If you find it extremely hard to be on the program in the first place you will drop off. Any unforeseen financial problems as big or small as they may be could contribute to you falling behind just one payment and getting the boot from the program. You need to very seriously think about how unwavering your finances and income security are before getting into a consumer credit counseling program to avoid being part of that 80%. The bottom line is debtors with a considerable sum of debt such as $15,000 or more should lean more towards credit card debt settlement than credit counseling. Credit counseling is much more suited for people with much lower sums of debt that do not have much of any issues keeping up to date with their accounts in the first place. If you are looking to lower your debt and get out of debt very quickly, then credit counseling is not the avenue for you to take.

Steve Bis is a debt analyst with the US Consumer Advocate, which practices debt relief.