Debt Counseling Agency: Mediators who Help negotiate for Debtors and Creditors

Fri, Oct 30, 2009

Those who have huge bills to pay to the credit card companies are under the severe burden of financial stress. A debt counseling agency does business to aid such stressed customers in getting relieved from this debt. They help the customers who have borrowed debt through credit cards and owe huge amounts of money to credit card companies. Such agencies help the customers in paying the money owed to the credit card companies and have a way out without declaring bankruptcy.

Debt Counseling Agency

Debt counseling businesses act like mediators between customers holding credit cards and credit card companies. They negotiate with creditors in favor of the debtors so that interest rates are revised and lower interest rates are arranged. The first task done by them is the consolidation of all payments to be made by the credit card holder. This gives the debtor a direction towards the repayment of the owed money to card companies. Just for example, a debt counseling agency can make a different kind of payment arrangement for a debtor who was earlier paying nine hundred dollars per month for repayment of credit card loans. This can be negotiated to reduce that to a consolidated amount of six hundred dollars per month. The customer is then asked to deposit the spare money as the principle money thus paying off at one time. The customer keeps on adding this extra money to the outstanding principle. In a small span of about five years huge credit card balances are eliminated.

Are customers denied for loans if they are into debt counseling?

Whether it is positive or negative depends on the creditor.

Some credit card companies may consider a debtor who has started repaying his debts as a responsible customer. He takes him as a committed person willing to repay his dues and set his financial position back on track. Other credit card companies might consider this debtor as an unreliable client because of the debtor’s irresponsible behavior and might not give any credit in the future.

Is it the best option to get out of debt?

The answer to this question depends on a specific case and its circumstances. Here, the debtor needs to analyze his financial situation with complete concentration and objectivity. Be well-informed and aware of the facts before you make a decision. It is always suggestible to contact a professional and clarify any doubts related to the issue.

How much debt counseling agencies charge?

Debt counseling agencies charge a fee in two different ways. They are as follows:

The agency might charge a percentage on the debt owed by the customer or if the customer asks the agency to act on his behalf the agency will charge a percentage of the amount they pay to the creditors of the customers.
The agency might also charge a flat fee based on the ability of the customers to pay. Under this method of charging the debt counseling agencies generally have a sliding scale to determine the fee.

Non-profit debt counseling agency:

If the customer wishes to go for non-profit debt counseling agency, he should carefully inquire about their services. This is because many debt counseling agencies working for profit mask themselves as non-profit agency and might have some hidden charges.