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Misconceptions About Credit Counseling

Woman getting help with debt management and her finances

When you are dealing with debt, there are plenty of people and agencies who genuinely want to help you. Unfortunately, there are also just as many companies who are interested in profiting from your pain. While there are reputable credit counseling organizations out there, there is also a fair amount of confusion about what debt is and how financial counseling can help you. In some cases, it is because credit counseling is confused with other debt programs. In other cases, it is because companies claiming to provide counseling and assistance are misrepresenting themselves.

Confused with Debt Settlement

Credit counseling agencies are often confused with debt settlement companies. On the surface, the two types of agencies promise the same thing. Both claim to help you when you are dealing with debt. However, there are major differences between the two. Usually, debt settlement companies are for-profit, meaning they aren’t necessarily putting your interests first. Instead, they are hoping to make some money off of your debt payment issues while simultaneously making your problems worse. For example, a for-profit debt settlement company might tell you to stop making payments on your debt before coming to an agreement with your creditors. Stopping payments before an agreement is reached can end up causing you to owe more in fees and thus, can damage your credit.

Confused with Debt Management

At some credit counseling agencies, enrolling in a debt management plan can go hand in hand with receiving counseling. Good counseling agencies won’t pressure you into enrolling in debt management program as your only option. Good counseling agencies won’t recommend it unless it’s really the best option for you. People shouldn’t be blindly steered towards a debt management program— make sure that your counseling agency has more than one solution to address your financial concerns.

Counselors should go over your financial situation in detail before recommending a plan. If a counselor doesn’t help you fully understand your situation or doesn’t offer you any alternative options, it might be best to work with a different agency.

Some Companies Are Less Up Front Than Others

Another source of confusion about credit counseling agencies is that some agencies are not as forthright or upfront with their clients as they should be. To protect yourself, you want to make sure your counseling agency gives you everything in writing before you agree to a plan. Ask what fees the agency charges. Ask what services it offers. Finally, ask if the agency offers sliding scale payments or will work with you if you can’t afford to pay. If the agency says it is a nonprofit, make sure to confirm its status with the IRS or ask an agency representative for additional documentation (like the agency’s Form 990 or other financial statements). Also, confirm that the agency has solid reviews and a good score with the BBB

While there might be a few bad apples in the world of credit counseling and debt help, many organizations (like CESI) genuinely want to help you. To learn more about how CESI can help you either get out of debt or put your finances in order, contact us today.

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