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8 tips for working with a credit counselor to reduce debt

[Feb 4, 2011.]


Many consumers are understandably wary of working with a credit counselor, even if they have become overwhelmed with debt from payday advance loans or other creditors. Some illegitimate businesses hide behind the façade of credit counseling, so consumers should carefully investigate a credit counselor before choosing one.

Eight tips seeking help for too many payday loans

  1. Search online for a credit counselor. Try the National Foundation for Credit Counseling site for advice and to find a local credit counselor.

  2. Ask each potential credit counselor about their services and fees. A legitimate credit counselor will provide free educational services and advice and will usually charge a low fee or no fee to set up a debt repayment plan.

  3. Ask whether the counseling agency is licensed or audited. A disreputable company will not provide this information.

  4. Ask if the credit counselors are accredited or certified. The training provided to credit counselors is crucial to the success of your debt repayment plan. The best credit counselors understand not only how to help you reduce your reliance on payday loans, but can also help you establish a solid financial plan.

  5. Consider your ability to repay your payday loans and other debts. Ask a credit counselor how the debt repayment plan works and how much your monthly payments will be. More important, ask what happens if you cannot make the full payment one month.

  6. Ask if your credit counselor can reduce your interest rate, finance charges and late fees on past due debt. Some credit counselors have a relationship with creditors that can work in your favor to reduce your overall debt.

  7. Find out if there are other options besides a debt repayment plan. Some people will be able to gain control of their finances with some free advice and a new budget without needing to enter a formal debt repayment plan.

  8. Ask about the impact of a debt repayment plan on your credit score. While the primary goal of visiting a credit counselor should be to reduce your debt and your reliance on too many payday loans, remember that your ultimate goal should be to improve your credit. Participation in a debt repayment plan will be entered on your credit report and can initially reduce your credit score. Eventually, the repayment of your debts should improve your score.

While fast payday loans can be a valuable immediate help when needed, spending some time on financial education with a credit counselor can bring long-term financial benefits for consumers.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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