« Understanding Foreclosure Gives You Options | Main | Ways ToStop Foreclosure »
Why Online Consumer Credit Counseling Programs Fail So Often!
By Credit Watcher | August 22, 2007
Most people here all of the good things that credit counseling can do for someone in debt. I would just like to shed light upon some of the negative aspects of such programs. Around 80% of people who enroll into a credit counseling program fail off and never complete the program. Below are some of the reasons that lead to such a high failure rate
1. Credit counseling companies are nothing more than middle men for the actual credit card companies themselves. Many credit counseling companies are actually funded and ran by the credit card companies themselves. They do not work on the clients behalf, the credit card companies dictate how much must be paid in interest and how much the minimum payment required is. And there is no negotiating on this at all.
2. While credit card companies can lower the interest they can never actually lower the balance that is owed. So for people with too much debt to realistically pay in full this isn’t much of an option. Credit counseling is not a true form of debt reduction, but rather an accelerated repayment process.
3. You still will pay more than what you owe. With interest, monthly fees, and lowered payments which will extend the time you are on the program.
4. This perhaps is the most negative aspect of credit counseling. If you are to miss as much as one payment you can be kicked off the program by the credit card companies. And they will not allow you to re-enroll into another credit counseling program for up to a year, while your debts go back to the interest they were at before. This really sets people back and shows very little flexibility in these programs. Realistically no one can guarantee that over a five year period of time that their income level will not drop at all, or that no unforseen emergency expenses will need to be dished out. These are two of the reasons that will cause someone to miss a payment, which can result in failing off the program. The normal credit counseling program will last around 4-5 years or more.
Another alternative to credit counseling is credit card debt settlement. Debt settlement programs are very different than credit counseling programs, but for some people debt settlement is a much wiser option. When it comes to debt settlement programs versus debt counseling,
it really depends on your financial situation as to which is more beneficial to you.
Topics: Credit Cards |