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Credit Education > Debt Management Help > The Advantages and Disadvantages of Credit Counseling

The Advantages and Disadvantages of Credit Counseling

By Janet Lacey
Published: Thursday, December 17th, 2009

For a lot of indebted individuals accepting their current situation is the hardest part. There are even those that point a blaming finger on interest rates and credit companies. The rationale is simple; debts are incurred by many individuals not because credit companies forced them to avail loans and credit accounts.

Every penny that is involved in debt will fall back to the borrowers. It is a personal decision that obliges those who decided to get a debt account to hold their end of the agreement. Managing debt can push individuals to see their lives as a waste of time and money and decide that bankruptcy is the best option. Before declaring bankruptcy there is one more stop that indebted individuals may take to be able to decide more reasonably. This final stop is to coordinate with a credit counselor.

Consumer Credit Counseling Service or CCCS talks to the creditors of many borrowers to negotiate for better payment terms. CCCS in a way represents the case of the borrower in the name of the borrower to creditors. This is the last stop that managing debt individuals should take simply because it is through this service that the real financial capability of the indebted individual is revealed. The financial capability of the indebted individual after being assessed by the CCCS will be used as justification in pleading the creditor for lower payments. A successful negotiation between the CCCS and the creditor would result to lowered monthly payment terms.

Managing debt through CCCS would require a lot from the borrower. CCCS before assuring the indebted individual that they will represent the indebted individual’s case to the creditor will first make the indebted individual sign an agreement. The CCCS’ required agreement states that the individual can not and will not enter into anymore debt agreement with any financing agency; as long as the agreed debt is not yet paid.

There is only one main problem that concerns with this strategy of CCCS. Most credit companies even after accepting that the borrower will pay lowered monthly payments will still report the payments as late payments. Late payments that will appear as either 30 days, 60 days, 90 days or 120+ days late will greatly affect the wellness of the credit report of the individual. It is a common knowledge that a worse report will only give lower FICO score.

The worst part of the CCCS’ plan in managing debt is that the possibility of the individual to fully pay off the debt is completely erased from the plan. Indebted individuals who signed in the CCCS’ required agreement automatically waived their right to get better loans that they can use to fully pay off their existing debts. Moreover, if ever that the indebted individual will be able to fully pay off his or her debt, his or her credit worthiness standing is already lowered because of late payments. This scenario would make further loan applications, installment plans availing and even subscribing a credit card account more difficult for the indebted individual.  

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