Are you wallowing in debts? Do you feel you have reached the breaking point financially? Financial counselling might be the help you need to break free from your economic misery. Financial or credit counselling is getting advice and guidance on managing your finances and recovering from debt.
Trained credit counsellorswill offer you educational materials, expert advice, help you create a feasible budget, develop a workable payment plan, among other services. There are two types of credit counsellors; for-profit and non-profit.
Types of financial counsellors
Financial counsellors can be categorized into for-profit and non-profit.
For-profit financial counsellor
For-profit financial counsellors are experts who offer credit counselling services at a fee, intending to make profits. Most of them will help you recover out of debt through debt management plans.
Non-profit financial counsellor
These are reputable financial advisors that offer their services for free or ask for nominal fees. The Federal Trade Commission recommends them because they provide trustworthy and unbiased financial advice. You can find non-profit counsellors in military bases, universities, housing authorities, credit unions, and the U.S Cooperative Extension Service branches.
What is the importance of financial counselling for recovering a debt?
Credit counselling is critical in debt management and recovery. It is much better than filing bankruptcy because you will protect your credit score and access fair interest rates on future loans. The following are the benefits of seeking the services of a credit counsellor:
Help you create a payment plan
If you are drowning in debt and don’t know where to start, a credit counsellor can help you create a feasible payment plan. They can negotiate with the lender to extend the payment period, scrap late fees, or reduce the loan amount. When you get a flexible payment plan, it is easy to gain control of your financial life.
Financial counsellors can also help you consolidate all your debts into a single payment. They can guide you into acquiring a new loan that will cover all the other debts so that you are left with only one loan to worry about. Multiple debts are easy to default because you may forget the due dates or pay the wrong loan. Consolidating them into one might be the push you need to get out of debt
Improve your credit score
Credit counselling can help you maintain or boost your credit score. The financial expert will teach you the dos and don’ts of credit reports or history so that you can avoid pitfalls that might hurt your credit. They will also help boost your credit score if they keep the debt collection agency from reporting you to credit bureaus.
Better management of your finances
A good financial counsellor will offer additional services such as budget creation, financial management and teach you how to multiply your income streams. Drawing your budget with expert help will identify loopholes and things you can let go of to get your finances back on track.
Hacks to help you choose a suitable credit counsellor
In your quest for a financial advisor, you will come across hundreds of non-profit and for-profit agencies. The following hacks will help you decide your best fit:
- Choose an agency that offers additional services such as budgeting, savings classes, and investment options
- Avoid agencies that put you into a debt management plan without first assessing your situation
- Financial counselling should not put more financial stress on your situation. Therefore avoid agencies that charge exorbitant fees or ask for payment before your debt recovery
- Always ask for written agreements/contracts before hiring the credit counsellor
- Don’t hire a credit counsellor if they lack the necessary training and certification from relevant bodies
Financial counselling is essential because the experts help you recover from debt by formulating a feasible payment plan, negotiating for an extension of the payment period, and helping you manage your finances. They also negotiate with lenders to scrap late fees and lower the interest rates.