Do Credit Counseling Services really help

Yes and No.

It depends on what you are looking for.

The ultimate answer is that they don’t do anything that you couldn’t do for yourself.

Task 1) They talk to you about your income and expenditure

Do it yourself : Write down all of your income on one side of a piece of paper and add it up. Write down all of your outgoings on the other side of the paper and add it up.

If there is an amount of money that you have available each week/month after paying your outgoings then this is what you can offer the people that you owe money to.

If you seem to be spending more each week/month than you earn, then you have a problem. Look at what you are spending on. Extra TV channels such as movies or sport may seem important, but they will not help you get out of this hole. Cigarettes may seem nice, but they are damaging your health and are not helping you clear your debt. Try to look at it as though it wasn’t you…. If someone said to you we know we owe you $1,000 but we cant pay you this week because we are going to the cinema, how would that make you feel, particularly if you needed that money to feed your family ?

Be realistic !

Task 2) Having completed Task 1 they then talk to your creditors about what you can afford

Do it yourself : Having been realistic about the above, approach all of your creditors with the same offer at the same time. It needs to relate to their debt size

If you owe 3 people money, the first you owe $500 and each of the other two you owe $250, but you only have $20 a month to spare, then the solution is that they get a share of that money. The largest debt gets the largest share, half of the total amount of debt they should get half of the available cash, so $10. The remaining two
at a quarter of the debt get a quarter of the available cash so $5 each.

Alternative : If you were able to offer lump sums in settlement then this is also an option that many Counseling Services suggest, but again, you can do it yourself.

Using the same example as above, you have $200 that you can offer to the people that you owe money to. The same rules apply, as the largest, you should offer the $500 debt half of the available amount, so $100, and the remaining two a quarter each so $50.

This may not seem like much, but the alternative is that they would have to manage your account for the next 5 years whilst $10 a month came in, of which $5 – $7 would be absorbed in costs. Better to take the lump sum and walk away.

REMEMBER to get confirmation that this Lump Sum arrangement is in “Full and Final Settlement” of the debt and that the remaining balance will not be registered against you in any form.

Having worked in Financial Services for 20+ years I have never known a Company refuse a reasonable offer, even where it meant giving up on 10’s of thousands of pounds !

It just isn’t in their interest to let you dig yourself deeper into problems.

So to the original question Do credit counseling service really help ? . If you have the confidence to do it for yourself then no not really, get on with it yourself using the above as guidelines. If your current predicament has caused a dent in your confidence then get on down there now and let them help you .

Either way, don’t let it get any worse, sort it out now !