How to Lower Payments through Credit Counseling |
By Kenneth Long on March 26, 2010
.jpg.aspx?width=75&height=75) Why does credit counseling enable you to get payment reductions with your creditors? The answer is that credit card companies created credit counseling decades ago to provide overwhelmed debtors with supportive services to enable them to manage their debt payments, maintain current payment status and eliminate their debt in a reasonable period of time.
It might at first sound odd that a for-profit credit card issuer would agree to lower your interest rates and reduce your payments if they thought you were a higher risk. After all, the point of risk-based pricing is to allow card issuers to offset higher default risks by charging higher fees and interest.
To understand this, you must understand how credit card issuers maximize profits. Sure they would like for you to pay as much interest as possible for as long as you live. However, they understand that if they don't provide real benefits to you in your time of need, they risk losing a lot of money when you default on your debt.
The Catch
The benefits of going through credit counseling can include lower payments, reduced interest rates and a shorter repayment term. You may even get relief from late or over-the-limit fees. While these are great benefits, there are a couple of requirements you must meet before you are eligible for this assistance.
First of all, you must demonstrate financial need. If you live paycheck-to-paycheck, it is very likely that you would be eligible.
Secondly, you must be willing to give up the use of your credit cards. While this may seem impossible, understand that those cards are not the lifeline that you think they are. As the balances grow, they weigh you down and threaten your very financial future. Credit cards are only a lifeline if they carry no balance. For a creditor to agree to lower your interest rates and reduce their profits, they require that you commit to your debt management program by including your other credit card accounts.
Credit counseling is not simply a consolidation plan to lower interest and payments. While those are components of debt management programs, credit counseling serves to help you balance your budget, maintain a spending plan and support your repayment efforts.
If you want to compare repayment options, simply look at the repayment projection on your credit card statement. It shows you how long repayment will take and what it will cost you if you continue making minimum payments. By completing credit counseling, you should be debt free within 3-5 years.
To find out more, begin your credit counseling session today. Accredited Financial Counselors provide you with a good faith estimate of what your new payment would be through your debt management program. They provide you with documentation of your own tailored plan so that you may review the details and compare with other options.
|
Current Rating: 0 (0 ratings)