Credit Card Counseling Pros and Cons

Jack, 27, is a young professional working with a software company. As he started earning well, he grew more and more friendly with his credit cards. He started making huge purchases against his credit cards and the habit of postponing payments increased the credit card debt burden on him. Finally, he was in a fix and unable to find any solution to deal with this big debt. One of his friend suggested him to seek help from credit counseling agencies in this matter. Now, what should he be aware of before approaching them? Let us discuss this in the next few paragraphs.

Jack is not alone, there are thousands like him who strain their finances beyond the limit and get into problems due to poor financial planning and lack of good savings. The duty of credit counseling agencies is to strike a deal between debt-ridden customers and their creditors which will help people get easy repayment plans and the creditors their money back. So, let us know about the pros and cons of credit card counseling to get out of this situation successfully.

Pros and Cons

The biggest advantage of consumer credit counseling services is that they negotiate for a better deal with your creditors on your behalf. So, if you have taken multiple loans and are paying interest against all these loans, the credit card counseling agencies can help you to combine all loans into a single loan. These agencies can also help you reduce the interest rate you are paying on these credit card loans. Usually, it is the high interest charged on credit cards which makes repayment difficult for the credit card users. Banks and financial institutions who issue credit cards charge a lot of money as the late fee if payments are not made on time. The credit counseling companies can intervene in this regard and reduce the late fees for you.

It would be possible to reduce your debt burden through the debt management plans which you will get from the counseling agencies. The repayment options made available to you would be quite flexible and this will help you come out of debt very fast. As you pay your debts slowly and steadily, your credit score will improve simultaneously and so will your relationship with your creditors. Once your creditors are assured that you are trying your best to repay their money, then you will not be receiving any loan recovery calls from them, which itself is a big relief.

We should also talk about the disadvantages of approaching credit counseling services. Many times, it has been observe that mismanagement on the part of the counseling agencies causes heavy losses for the credit card holders, thus causing more problems instead of solving them. The credit report of the consumer can become more pathetic because of such mishandling. Another disadvantage is that the Chapter 7 bankruptcy will appear on your credit report for ten long years which is very humiliating for any person. Also the chances of securing loans from banks are very meager due to bad credit report. All the facilities promised to you by your counseling agencies may not be fulfilled and this will be detrimental to your interests of bringing back your finances back on track.

So, before you take any decision regarding your credit card debt, think of the above-mentioned pros and cons to avoid any disaster. Proper financial management along with good savings ratio and wise credit card use are the keys for making yourself financially stable. All the best and work smart!