Credit Card Counseling

Credit Counseling Options

So what is credit counseling or credit counselling?

It's a debt help process offering education to consumers about how to avoid incurring debts that cannot be repaid. The process is actually more debt counseling than a function of how to handle your credit more effectively or efficiently.

In the UK there is a regulatory body for these services called the CCCS or Consumer Credit Counselling Service. The CCCS is a charity, so you won't pay a penny for any of their services - whether you need immediate debt advice tailored to your situation or more general budgeting advice.

So what options are available in credit counselling?

The following options are justa few options available and are typically for debts over 15,000. However a credit counsellor will be able to help even if you debts are lower than 15,000 and may even suggest a DMP for this purpose.

Debt Management Plan (DMP)

Credit counseling often involves negotiating with creditors to establish a debt management plan (DMP) for a consumer. A DMP may help the debtor repay his or her debt by working out a repayment plan with the creditor. DMPs, set up by credit counselors, usually offer reduced payments, fees and interest rates to the client. Credit counselors refer to the terms dictated by the creditors to determine payments or interest reductions offered to consumers in a debt management plan.

Individual Voluntary Arrangement (IVA)

An IVA is a formal and legal agreement, and is designed to help those who have high levels of debt - that is, those with a large amount of debt that cannot feasibly keep up repayments based upon their income - to benefit from lower monthly repayments and the opportunity to free themselves from debt in a far shorter period than they would otherwise be able to. With an IVA, the idea is that you reach an arrangement with all of your creditors with regards to how much you can afford to repay each month based on your income and outgoings. You then pay the agreed amounts to each creditor for a period of five years, after which the remainder of the debt is written off. The amount of the total debt written off can be as high as 75% depending on circumstances.

Conclusion

An IVA or DMP are just a few of main options offered by a credit counsellor. In extreme situations a bankruptcy may be suggested but this would only be in the most extreme of cases.

Credit counselling is certainly something you should consider, especially if you are already struggling to keep up with repayments on existing debts. Credit counseling will certainly give you peace of mind and the sooner you act the sooner you can start living a debt free, and stress free, life.