Poor spending habits and the misuse of credit cards is causing a great deal of misery across the country. In addition recent down turns in the housing market and high cost of energy is causing many people to find themselves further mired in serious debt. Basically most people have carelessly borrowed too much money and now cannot make their monthly payments.
Once you find yourself in this predicament you will consider an easy way out in the form of bankruptcy. However recent changes to bankruptcy laws make it harder to totally discharge all your debt. In addition a bankruptcy on your credit report will remain there for 10 years. Before you see a bankruptcy attorney you should consider other alternatives to eliminating all your debt.
Credit counseling is a good first step in reducing and managing your debt. Nonprofit debt consolidation service is available from many different sources including churches, social services and fraternal organizations. Understand that a nonprofit debt consolidation service does not mean the service is free. You must still pay for services but in most cases the fees are much less than those charged by for profit debt counseling companies.
Debt counseling has a major benefit in the fact that they unlike bankruptcy proceedings will not ruin your credit rating in the long term. In addition they are used to working with creditors and negotiating for an immediate reduction in your debt. They have their most success in dealing with credit card companies who in some case will reduce you debt by as much as 50 percent.
Following the debt reduction efforts the credit counseling service will find ways to consolidate your debts into a single debt. In many cases they will find a financial institution that will develop a consolidation loan that will lower you monthly payment by reducing the interest rate and lengthening the payback period. This can result in providing money that can be used to further reduce you debt and pay your living expenses.
Debt consolidation is a double edged sword for many people. True it does free up money than you can use for other things. However if you are undisciplined like many people you will not use the new money to pay off your debts. Instead you will continue to borrow money with credit cards and you will find that you are right back in serious debt again. Studies have shown that this occurs more than 78 percent of the time.
A good nonprofit debt consolidation service will work with you to prevent you from getting in to trouble again. However you must understand that despite being nonprofit some of these organizations do collect fees from financial institutions which provide consolidation loans. In some cases the nonprofit may even be the actual consolidation loan lender. Their main goal is to get you to apply for a consolidation loan. The counseling services are more of a sideline.
When selecting a nonprofit debt consolidation service you should do a good job of research before you sign on the bottom line. Be sure to ask what services are provided and what the cost of these services is. Make sure that they will continue to counsel you well beyond any debt consolidation service. It takes time to change spending habits and get out of debt. You will need all the help you can get. In many cases you can be debt free within 4 years or less if you follow the plan. In many cases it is far easier to get out of debt than to stay out of debt. Only by following a good budget plan will you be debt free.
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