The Dark Side of Credit Counseling

When facing serious debt problems,  consumers are often advised to seek credit counseling immediately.  But did you know that turning to the wrong  counselor for help can cause more trouble and frustration?  Why should you be cautious when choosing a  credit counseling agency?

How  Credit Counseling Works

First, let’s discuss how credit  counseling works.  A credit counseling  agency negotiates with creditors on behalf of the borrower.  A credit counseling agency can ask for a  lower interest rate or adjustments in your fees to make repayment easier for  you.  Most agencies have built  partnerships with different lending companies so it’s easier for them to  negotiate.  In exchange for their  services, some agencies charge monthly fees for as low as $10 to as much as  $100 or more.

In extreme debt cases, a counselor  may advise debt consolidation or debt settlement as possible solutions.  Nevertheless, a reliable credit counselor  should not focus solely on these two methods of debt reduction.  More importantly, a credit counseling agency  should help a person address the root of the problem.  It should be able to teach about correct  financial management strategies to help a client stay away from debt problems  permanently. 

The  Dark Side of Credit Counseling

Unfortunately, many consumers fall  victims to credit counseling agencies that take advantage of their financial  situation.  Some agencies actually charge  expensive rates for their services.  Some  of them may insist on debt consolidation loan as the best solution to the  problem.  The unsuspecting client may  agree to be part of a debt consolidation program, not realizing that it would  bring more pain and trouble. What is the danger in signing up for a debt  consolidation program?

Some consumers found themselves  stuck in deeper debts after getting a debt consolidation loan.  The reason?   Their monthly interest rates unexpectedly increase right in the middle  of their repayment.  Under a  consolidation program, a credit counseling agency may also volunteer to submit  your payments to your creditors.   However, instead of submitting your monthly payments, an agency can  actually withhold your payments and not pay your creditors until the deadline.  Many fake credit counseling agencies also  charge hidden fees that can only add up to your burden.

These agencies don’t really care  about your debt problems.  They’re only  after their own interests – and that is to make profits from your debts.  Many consumers were forced to drop out of a  debt consolidation program because they’re not making any progress. After  resorting to debt consolidation, they had to file for bankruptcy as a last  resort for their problems.

Don’t let the same thing happen to  you. Before signing up with any credit counseling agency, carefully examine its  background and reputation.  Check from  the Better Business Bureau if the agency has had complaints in the past.  Even so-called “non-profit debt counseling  organizations” can be a fraud.  If you  don’t take time to do your research, you can end up as a victim of these  predators.  Therefore, do your homework  and save yourself from the dark side of credit counseling.

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