How Does Credit Counseling Work?
Whether you want to ease the burden of unsecured debt or you merely want to develop a realistic household budget, credit counseling should be the first place you start! Most individuals that contact a credit counseling agency are overwhelmed with credit card debt, but others simply wish to get organized and create a budget.
Below is the Process or Steps in a Credit Counseling Session so you can be totally prepared, and take full advantage of the advice and suggestions that you’ll receive to help you get out of debt.
Step 1 – Sign Up:
Sign up for online credit counseling, call in for an over-the-phone session, or meet with a credit counselor in person. The majority of people will either choose counseling online or by phone because it’s more convenient.
When you start your counseling session you will be asked to provide important information about your personal finances. It’s good to have your financial documents on hand such as credit card statements, utility bills, pay stubs, etc.
You’ll be asked to supply creditor information such as credit cards, retail store revolving accounts, student loans, finance company loans, collection agency accounts, and medical debts. This information is needed to create a complete financial overview, a realistic budget, and a customized Action Plan tailored to your specific situation. A typical credit counseling session usually takes around an hour to complete.
Step 2 – Provide Financial Information:
When going through your credit counseling session whether it’s in-person, online or over the telephone some of the topics that will be discussed are:
- Personal information such as your full name and contact info.
- Preliminary information (general information) like your marital status and date of birth.
- Sources of income.
- Expenses related to housing.
- Expenses related to food and clothing.
- Vehicle and Transportation related costs.
- Monthly insurance and medical expenses including prescriptions.
- Other miscellaneous expenses such as childcare, entertainment, gym membership, donations, gifts, etc.
- Any savings and retirement contributions.
- Information about each of your unsecured creditors such as total outstanding balances, minimum monthly payments, and interest rates.
- Additional financial obligations such as student loans or personal loans.
- Any additional comments about your current situation like how or why you got into debt, or what you hope to achieve from a counseling session.
These types of things must be discussed with your credit counselor because they can’t help you get out of debt unless they know how you got there in the first place. So, even though these things may be of a sensitive nature it’s important to discuss them with your counselor. Advantage’s certified credit counselors are very friendly, non-judgmental, and understanding. You are in safe hands!
Step 3 – Review & Assess Your Situation:
After all information has been collected and reviewed, you’ll be presented with a detailed summary of your current household budget. You’ll examine this budget to see if you have extra money left over at the end of each month or if you have a “shortfall” and there’s NO money left over.
Once you’ve looked at your budget and assessed the situation, you’ll then move on to review your customized Action Plan. Within the Action Plan, you may be able to see some places where you can make some cut-backs or find opportunities to save money every month. This is very important because there are always cut-backs that someone can make to “free up” some money, such as getting rid of cable TV or canceling your monthly gym membership.
Step 4 – Examine Debt Relief Options:
Your counselor will discuss with you which debt relief option might be right for you. You’ll receive an expert opinion on what may be your best path to regaining financial stability in your life. A Debt Management Program might work well for you, and if that’s the case your counselor will discuss how the program works. Bankruptcy might be another option, and in that case the counselor would advise you to speak with a Bankruptcy Attorney.
If you completed your credit counseling session online, a counselor will contact you via telephone or email once all of the information that you’ve entered has been reviewed. The counselor will discuss the next steps and what debt relief options might work best for you.
Credit counseling shouldn’t be scary, stressful, or upsetting. You are on the right path to getting your finances back in order, and getting your life back on the right track. Be proud that you are taking action to make things better and seeking out all of your available options.