If you're one of the many residents in Virginia struggling with credit card debt as well as other types of "unsecured debt," one popular form of debt relief called "credit counseling" could offer you good news. These days, there are several ways to get relief from debt, including credit counseling or debt consolidation, debt settlement, or even bankruptcy.
Debt consolidation through a credit counseling agency, or what others might refer to as a debt management plan (DMP), typically involves consolidating or combining your high-interest credit card debts and unsecured debts (like gas charges, department store charges, or medical bills) into one, more manageable, and more structured monthly payment made to a credit counseling agency.
By contrast, debt settlement generally involves a process where consumers hope to settle, or negotiate, with their individual creditors for significantly less than the actual debt amount.
In recent years, both methods - debt consolidation and debt settlement - have become popular alternatives to bankruptcy, which is also a form of debt relief, but one that has a more devastating and longer lasting impact on personal credit.
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Types of Credit Counseling Services
As the credit and banking crisis that swept through Virginia and the nation in the last several years took its toll, many consumers have had to deal with an unmanageable amount of debt. As a result, many consumers are turning to credit counseling services, including non-profit agencies and Christian credit counseling services, to help them reduce their credit card and unsecured debts.
If you are in a similar situation, it is wise to always do your due diligence when choosing a credit counseling company. One way to do this is to review a company's Better Business Bureau (BBB) rating - which is usually a good indicator of a company's customer service history as well as its business practices.
Consolidating Debt with Credit Counseling
For many residents in Virginia and elsewhere, credit counseling is a viable and proven way to help reduce and manage debts. If you are considering debt relief and planning to enroll in a debt counseling program, here's a typical scenario:
Credit counselors, initially, will review your finances, debt amount, and income. Using the financial information that they have gathered, credit counselors will usually submit proposals, on your behalf, to individual creditors asking for reduced interest rates, the waiving of any late fees or penalties, and generally, more favorable repayment terms.
Creditors that accept those proposals are entered into a debt management plan (DMP). As mentioned earlier, the goal of debt consolidation is to combine your credit card debts and unsecured debts into one, more manageable, and more favorable monthly payment plan made to a credit counseling agency. The credit counseling agency, in turn, will distribute those funds to individual creditors.
While many consumers get much needed relief through credit counseling, it is worth noting that it is still your responsibility to make sure that funds are available in the account set up by the credit counseling agency.
The bottom line is, if you are overwhelmed with credit card debt, debt consolidation through credit counseling is, generally, an honorable and effective way to reduce your debts sooner than if you only continued to make the monthly minimum payments at higher interest rates.
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