What Can a Credit Counselor Really Do?

This guest post comes from Thomas J. Fox. Thomas is the Community Outreach Director at Cambridge Credit Counseling Corp. He is an AFCPE-accredited credit counselor and IFL Certified Educator in Personal Finance who, over the last decade, has created a number of guidebooks, DVDs and educational curricula designed to educate young people and low-income individuals about personal finance. Mr. Fox also co-hosts Money America, a weekly radio program that airs on WAIC 91.9 FM.

If you’re like most Americans, there are probably a lot of things you wish you knew before our current recession hit. Perhaps you had too much debt, or not enough savings, and as a result found the economic downturn especially difficult to navigate. Don’t worry – you’re not alone. Most Americans are guilty on both counts. Before the recession hit, our country held almost $1 trillion in credit card debt, and our personal savings rate had hit an all-time low of negative 2.7%. While we all wait for a time machine to be invented, we should use this latest crisis as an opportunity to learn how to make better financial decisions.

Financial education

Everyone agrees that a well-rounded education is the foundation of success, so it’s more than a little surprising that only seven states require courses in personal finance. Many experts have cited this oversight as a contributor to the economic crisis. Why? Because many people were simply unprepared to deal with the choices they faced. Should I rent or purchase a home? If I buy, what kind of mortgage should I get? What’s the best way to save for my child’s college tuition? Should I settle my debts, or pay them down responsibly? How much will I need for retirement? The good news is there are organizations out there that can provide you with the financial knowledge you need to answer these and a host of other tough questions, and they’re only a phone call away.

Credit counseling

Many people mistakenly think that credit counseling agencies simply provide debt management plans, but, in fact, the more established organizations generally offer a variety of other programs, including housing counseling – a service that a lot of displaced homeowners wish they had used before they signed up for an exotic mortgage they couldn’t really afford. The most reputable agencies are staffed by certified credit counselors who offer free financial assessments and create personal action plans based on your unique circumstances. A counselor can show you how to create a workable budget, deal responsibly with decreases or increases in your monthly income, communicate effectively with bill collectors and, if need be, whether you should investigate filing for bankruptcy. Most of all, counselors provide people with the tools they need to make more informed decisions.

At the risk of sounding like a commercial, let me use my agency, Cambridge Credit Counseling, as an example. The people who call us, roughly 32,000 per year, are each offered a free examination of their finances, a personalized plan based on the outcome of their counseling sessions, a copy of our Learn Now or Pay Later financial guide, and a copy of our DVD, Budgeting with the Connors. Other reputable credit counseling agencies offer similar products at no cost to consumers – they do so because their mission is to help.

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Can’t go it alone? No problem

Millions of Americans find it difficult to develop a workable financial plan. That’s not a put-down in any way – it’s just not within their expertise. And for those who’ve seen their income significantly reduced and been hit by increases in their minimum monthly credit card payments – a terrible double whammy, there’s a lot to lose by waiting for things to turn around. The good news is that credit counseling agencies can usually help in these situations, too. Depending on your creditors’ policies, you may be eligible for participation in a debt management program, which typically includes a reduction in interest rates and fees, allowing you to afford your monthly payments and pay down your accounts over time, generally 3-5 years. In addition, you’ll be provided with ongoing educational counseling and support throughout your enrollment, helping you manage your finances more effectively once the debt management program is complete.

Whether you’re trying to understand a particular aspect of your personal finances or attempting to deal with unmanageable levels of indebtedness, credit counselors can help. Best of all, non-profit credit counseling agencies provide their services free to the public. Before seeking costly remedies for your financial problems or taking steps that may significantly damage your credit, take the time to speak with a professional who has your best interests in mind.

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