Consumer credit counseling may not directly help avoid a foreclosure, but can certainly be of great help to the debtor in finding a solution.
Consumer credit counseling and foreclosure
Even if it is unable to directly prevent a foreclosure, a consumer credit counseling agency can greatly help a debtor by teaching him/her the art of budgeting
and getting in touch with lenders. Consumer credit counselors possess a lot of experience as well as expertise in this field, so it should not come as a surprise if they come up with a solution that was never really thought of by debtors. A consumer credit counseling agency often succeeds in minimizing penalties and negotiating reduced amounts of payment with lenders. Sometimes consumer credit counselors can also settle your debt for less than what is due. Put differently, they can reduce the chances of a possible foreclosure by guiding you along the right path.
Acting as intermediary
Consumer credit counseling agencies act as intermediary between debtors and lenders. They deal with lenders on debtors’ behalf to reduce interest, waive late payment fees, cut down monthly payments, chalk out new debt repayment plans etc. Lenders usually accept it because they do not want to lose the whole amount of lent money if the debtor decides to file for bankruptcy. The new terms make it much easier for a debtor to cope with the situation. Consumer credit counseling agencies often take one consolidated debt payment from the debtor and disburse it proportionally to the creditors each month. Credit counseling agencies sometimes persuade creditors to cease collection activity as quid pro quo for timely minimum monthly payments. If you make regular monthly payments to the agency for a considerable period of time, it will negotiate with your creditors to give your credit rating a fresh start via the re-aging process. This won’t leave a blot on your credit file while you pay off your debt.
Finding the right agency
In view of the increasing number of scams, you should be extremely careful while choosing a consumer credit counseling
agency. You should try to find an agency that furnishes a detailed account of what charges and fees you are likely to pay up front. It is also sensible to consult people who have used an agency for recommendations. The track record of an agency should always be considered while making your choice. Look for one that has counselors adhering to AICCCA standards, is non-profit, charges an affordable amount of fees. It is also wise to check with the Better Business Bureau before trusting a consumer credit counseling agency. And even after that, you should check your credit report every month to make sure that there is nothing wrong.
Consumer credit counseling agencies work by communicating with lenders. You can do it yourself if you have the inclination to do some research. In fact, it is communication that plays a key role in avoiding debt problems and foreclosure.