The average person carries several thousand dollars of debt. While this may not be a lot in the grand scheme of things, it does make a difference to a person’s creditworthiness if they can’t pay. If this is where you fall, credit counseling may be the answer. Here are some facts about the credit counseling process.

A person with a sizeable debt that is hard to manage may consider talking to a credit counselor. A credit counselor is someone who is well versed in the area of debt management and repayment. Their job is to help an individual not only to get out from under their debt situation, but also to educate them on how not to end up there again.

Credit counselors work for the consumer. They exist to help you work out an agreement with the creditors to get them their money and you back into financial shape. A credit counselor will listen to the particulars of the credit debt situation and come up with suggestions for a debt repayment plan.

The debt repayment plan takes into account your assets, earnings, and ability to pay. The monthly payment will be based on what you can pay without causing other bills to fall behind. These counselors have established a rapport with many creditors and know what they will and will not accept concerning payment arrangements. As much as fifty percent or more of your outstanding debt could be forgiven.

Credit counselors usually have backgrounds in business and/or finance. They also know how to counsel people in such matters. They must keep up credit counseling certification to be recognized as a legitimate practitioner of this service. Training and testing are involved in the process of becoming a certified credit counselor.

Credit counselors will offer information on credit repair. They advise clients about how to rebuild credit after they have gone through debt restructuring. They stress the importance of reviewing and understanding a credit report. Most importantly, they discuss how to manage money wisely so that debt is not a way of life, but something to be avoided in the future.

Credit counselors do not repair your credit. Some people are under the impression that credit counselors will help to fix credit after the repayment plan is completed. You, the consumer, can fix your credit in as much time as it will take them. Ask for advice on how to go about the process, but work on fixing credit on your own. It will be a helpful learning experience.

Credit counseling services may charge a fee. Check into the programs that appeal to you and find out what, if any, fees will be asked of you. If the credit counselors are reputable, go with a company that charges fifty dollars over the one that charges a higher rate. More expensive doesn’t mean that the services are better.

Credit counselors are there to help you. They work with creditors to lower payments for the consumer. If you have reached the point of pulling your hair out, give them a call and find out what they can do for you.

Debt consolidation is a solution sought out by many debtors who are in too deep. This can be achieved by transferring all debt to a low-interest credit card, or by taking out a home equity loan. There are also debt consolidation or credit counseling services that consumers can utilize.

How do these services work?

Credit counseling consists of negotiating with a client’s creditors for lower interest and/or lower payments. Late and over-the-limit fees are often waived as well. Then the client sends the credit counseling agency one payment each month, and the agency distributes the money to creditors as agreed upon.

The pros

If you’re unable to negotiate lower rates and payments with creditors on your own, a credit counselor can usually do it for you. This will save you money and help you get your debt paid off more quickly. The credit counselor can also help you write a budget to help you stick to the payment plan while still being able to afford all of your other expenses.

The cons

One problem with credit counseling is that it sometimes does not result in a monthly payment that the client can afford. Creditors are only willing to negotiate so far, and if you owe a lot of money you may not be able to afford the best deal they will give you. If that is the case, you’ll have to either find another means of paying your debt or consider bankruptcy.

Another thing about credit counseling is that it isn’t free. Credit counseling agencies may charge monthly fees for their services, adding them on to your monthly payment. If they don’t, they have to get the money to pay their employees somewhere. That “somewhere” is usually from your debtors, as a percentage of your payment.

There is some debate as to how going through credit counseling affects your credit. It is noted on your credit report. In most cases, you can’t get new credit until you complete the program. But it could also affect you after your debts are paid off. Many lenders consider credit counseling as being similar to Chapter 13 bankruptcy.

And finally, it is imperative to check out any credit counseling agency that you are considering. Just like any other business, there are some that are not trustworthy. The Better Business Bureau is a good source of information on credit counseling agencies.

Credit counseling may be able to help you get your debts paid off. But it is important to consider the pros and the cons of entering such a program. Trying to work out a deal with creditors on your own may work, eliminating the need to get a third party involved.