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Do Nothing | Bankruptcy | Credit Counseling | Debt Consolidation | Debt Settlement |
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Prior to the introduction of the Consumer Credit Counseling companies, Americans had very few options to deal with debt reduction, other than filing bankruptcy. Consumer Credit Counseling organizations were originally set up by a major credit cards company in the early 1980s as a means of recovering money from thousands of people that were starting to fall behind on their payments. The main attraction of consumer credit counseling is creditors may reduce the interest rates and potentially reduce existing late and over-limit fees. However, this is never guaranteed.
Additionally, in a credit counseling or debt consolidation program, the debtor makes a single monthly payment to a credit counseling agency that is, in turn, responsible for disbursing these payments to the creditors. Many times, the new monthly payment consumers make to the credit counseling or debt consolidation agency is more than their regular monthly minimums made directly to the credit card companies. While a consumer counseling plan may be a good option for someone who is not struggling in making minimum monthly payments, this is in no way provides consumers with the monthly cash relief that is desperately needed. Because of this, nearly half of consumers who enroll in a consumer credit counseling or debt consolidation program end up falling out before they ever pay off their debt.
For many Americans, simply reducing the interest rate, on already high balances, does not have a significant impact on their overall credit card debt. Most consumers who are in need of debt assistance need immediate monthly cash flow relief, however, Consumer Credit Counseling or Debt Consolidation programs do not automatically provide consumers with this much needed monthly assistance. Consequently, the 4-6 year plan they were originally promised by these agencies turns out to be considerably longer.
As mentioned earlier, consumer credit counseling or debt consolidation programs basically work for the creditors - not you. Because of this, they may not have your best interest in mind.
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