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Credit Counseling

One method used by many people to get out of debt is credit counseling. A number of companies have involved that specialize in this approach. Here is basically how it works!

The CCC (Credit Counseling Company) will ask for a listing of all your creditors, the amount owed, the monthly payments, and the interest rates, They will contact all the creditors, negotiate a much lower payment and come up with a monthly payment that includes their fee. It is usually very low as many of these companies are non-profit organizations. They will require that you write one check per month to them or they will debit your checking account monthly. They then pay each creditor the reduced monthly amount they have negotiated. The creditors have reduced the payment and interest rate because they know they will be paid on time by the CCC via electronic fund transfer.

This method of debt reduction will affect your credit score negatively to some degree but is not as detrimental as bankruptcy. The CCC requires that you close every account in the program and do not use them while they are paying them off so it may be wise to keep at least one card current. Suggestion: keep the card with the lowest interest rate and lowest balance.

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