CREDIT COUNSELLING

Submitted to: Sir Remigio Musca

Submitted by: Joana T. Fajardo
Cherrylyn Victorino
BSED 4-G
 What is credit counseling?
Consumer credit counseling services help overextended
credit users eliminate high interest rate credit card debt.
It’s their mission to help you regain stability. Certified
credit counselors evaluate your debts, budget and credit.
Then they help you identify the best way to get out of debt
in your situation.
If you can’t eliminate debt on your own, they can
also help you enroll in a debt management
program. In this case, the credit counseling agency
acts as a go-between for you and your creditors.
They set up a repayment plan that everyone can
agree on. Then they negotiate to reduce or
eliminate interest charges.
 Types of counseling services
There are two types of credit counseling – for-
profit and non-profit. The difference between the
two is how they earn revenue.

For-profit counseling agencies earn revenue

through fees. That means their plans tend to be
more expensive for the credit user.
Non-profit agencies are supported through
grant money. Credit card companies provide
grants non-profit agencies can help their
customers get out of debt. This means lower
fees for the credit user. In fact, non-profit
agencies offer debt evaluation entirely for free.
They only apply fees to set up and run a debt
management program.
For most people who are struggling with debt,
non-profit credit counseling is the better option.
You pay fewer out-of-pocket costs, which can
be helpful. That last thing you need as you get
out of debt is a big bill. If you’re looking for
non-profit counseling services, fill out the form
at the top of this page. Debt.com only refers
you to the best accredited non-profit consumer
credit counseling services.
 CREDIT COUNSELING
Step 1: Free evaluation
Step 2: Debt management program
enrollment
Step 3: Your counselor’s role during
enrollment
How does credit counseling work? The nonprofit version.
Step 1: Free evaluation
One of the problems people encounter with debt is that
they don’t know what solutions to use. Until you get into
debt, you don’t know all the options available to get out
of it.
Certified credit counselors understand all the options
available. So, they can help you assess which one is right
for your unique financial situation. Counseling sessions
are usually done over the phone.
To start the process, the credit counselor will ask for some basic
information. This includes:
Your income
Current debts- including secured debts like your mortgage or auto loan
Monthly expenses – i.e. groceries, gas, entertainment, subscriptions…
everything in your budget
Current balances on your credit cards, as well as the APR on each
account
Other obligations, such as payday loans and unpaid medical bills
You also authorize the counselor to run a credit check. This allows them
to review your report to see if you have collections or other items of
note. This is a “soft” credit inquiry, so it does not impact your credit
score.
Once they have a good picture of your finances, the counselor
makes recommendations for debt relief. This can include:
1. Balance transfers- is the process of transferring high interest
debt from one or more credit cards to another card with a lower
interest rate.
2. Consolidation loans- the process of taking out one loan to pay
off two or more unsecured debts. A debt consolidation loan
could be used to pay off those bills , leaving you with only one
monthly payment.
3. Debt management programs- is a carefully constructed
payment schedule that consolidates credit card and other
unsecured debts into one affordable monthly payment.
Borrowers in debt management program agree to stop using
credit cards in exchange for lower interest rates and more
affordable monthly payment.
4. Debt settlement- also known as debt arbitration is an
approach to debt reduction in which the debtor and creditor
agree on a reduced balance.
Nonprofit counselors are required to review ALL
your options. They only recommend the best
solutions for your situation. In other words,
nonprofit agencies don’t try to “sell” their
program.
This makes counseling the best way to find a
solution that fits your needs. You can get an
unbiased, expert opinion about what you need to
do to get out of debt. You can ask questions about
different solutions and learn how to minimize
things like credit damage.
Step 2: Debt management program enrollment
Both for-profit and nonprofit agencies can help you
enroll in a debt management program.
Nonprofit organizations only recommend a program if
it’s the best option for you; otherwise, they tell you
where to go.
If a DMP is the right option, you can enroll through the same
agency that evaluated you in Step 1. Here’s what you can expect:

First the counselor asks which debts you want included in the
program. Enrollment is 100% voluntary, so there’s no
requirement to include all your accounts.
Most counselors will tell you to include everything.
However, some people decide to leave a card out of the
program for emergencies; if you decide to include that
account later, you can talk to your counselor to add it in.
Together, you set a monthly payment you can afford to make.
Each creditor must sign off to include their debt in the
program.
Your counselor also negotiates with each creditor to:
Reduce or eliminate the APR applied to your debt and
waive future penalties and late fees.
Step 3: Your counselor’s role during enrollment
*Each month, you make one payment to the credit counseling
agency; they send the money to your creditors as planned.
**During your enrollment, the counselors will also help you create a
budget. This allows you to live without any relying on credit cards.
Be aware that any account you include freezes when you start the
program.
*They also provide free resources you can use to build financial
literacy; this helps you learn how to avoid debt problems in the
future and plan for long-term financial stability.
*If you run into trouble during your program, you can talk to the
counseling team to make special arrangements.