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Traditional Debt Relief Strategies

Credit Counseling

If you have just gotten a little behind on your debts and need some help with your monthly payments and interest rates, credit counseling may be right for you. It is important to note that you will be paying back 100% of your debt in a Consumer Credit Counseling Service (CCCS) program. Debt relief comes in the form of reduced interest rates and an accelerated pay-off period, not principal reduction.

Many for profit and non-profit CCCS agencies have pre-negotiated terms with credit card issuers. These terms allow for interest rate reductions as long as you maintain your payment schedule.

Other significant benefits of CCCS enrollment are that collection activities cease and your credit score isn't negatively impacted, though enrollment in a CCCS is visible on your credit report and may impact your credit worthiness with some creditors. To determine whether you are a good candidate for CCCS, ask yourself:

  • Can I afford 80-90% of your current minimum monthly payments?
  • Are my interest rates higher than average?
  • Do I feel confident I can stick to the scheduled payment plan for an extended period of five years or more?

A final benefit of using a CCCS is that they do it all for you. Just send them a check every month and they handle the rest. Here are the pros and cons to consider:

  • Pro: 10-20% reduction in your minimum monthly payments.
  • Pro: You reduce your effective pay-off amount and shorten your pay-off period.
  • Pro: Collection activities, if started, should stop.
  • Pro: It doesn't affect your credit score.
  • Pro: You write a single check each month.
  • Con: CCCS or a Debt Management Plan (DMP) is noted on your credit report. If you need new credit, lenders are less likely to extend it to you while you are in a DMP.
  • Con: You still pay back 100% of your debts, albeit at lower interest rates, over a period of 5 or more years.
  • Con: Some forms of debt won't be included in a CCCS program (some medical debt, for example).

(For a referral to an accredited credit counseling program you can trust, fill out the form to the left.)

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