If you are like one of thousands of debtors in the country, you may be considering debt relief methods such as debt consolidation. Credit counseling experts find that these and other options for debt relief are becoming more popular as the economy continues to struggle and people make do with less and less. No matter how large or small your financial problems may be credit counseling can help. Unfortunately, most people who need the help do not seek it. If you are thinking about debt consolidation, credit counseling can help.
Debt consolidation is one of the most simple means of debt management. If you have equity in your home or another significant asset and good credit, it’s likely you’ll be approved for a debt consolidation loan. That’s the easy part. The hard part is changing the spending habits that got you into financial difficulty in the first place. That’s where the expertise of a credit counselor can come in handy.
Here’s an example: An individual accumulates credit card and loan debt worth $25,000, overall. He has built up a considerable amount of equity in his home, which he can use to borrow money against. He has, at the moment, a decent credit rating, and with it no trouble in finding a creditor to lend him money he can use to pay off his credit card bills. Problem solved, right?
Realistically speaking, the person has not reduced his debt at all – what he has done is lowered the monthly payments he needs to make towards his overall debt with cash borrowed against his home equity. Prior to the loan, his overall debt was comprised of credit card and installment loan payments. After debt consolidation, he now has a loan against his home equity requiring the monthly payments to satisfy the terms of the loan, but his credit card debt has been cleared. Important to note, his credit card balances now read zero, which could very easily push him back to the brink of financial disaster if he doesn’t change his spending habits. In no time at all, his credit card balances will build up once again, only now he also has the debt consolidation loan to content with, possibly putting his home at risk if he cannot make all of the payments.
Because not many lenders require credit counseling or the closure of credit card accounts, people often borrow money to clear some debts, only to build new debt or accumulate larger debts than they had in the first place. When it comes to government supported debt relief solutions such as the Orderly Payment of Debts, bankruptcy filings, and consumer proposals, at least two credit counseling sessions are required. These sessions lower the likelihood of a relapse into debt by giving the debtor the education he or she needs to understand how to manage debt better. Within these sessions, discussion is not solely limited to information about debt consolidation – credit counseling can teach an individual to curb debt by lessening spending, increasing income, budgeting and making the most out of what you currently have.