Credit Counseling Service Continued…

Advantages and Disadvantages

Most people use Credit Counseling Services in order to pay off their debt and build their credit. A great advantage of this method is that, because the Credit Counseling Service negotiates lower interest rates, you save money each month. Interest rates become a huge portion of a debt problem over time, as they can skyrocket when payments are missed or late. Increased interest rates mean more accumulated debt, which, of course, is just perpetuating the original problem. So, Credit Counseling Services can save you a lot in interest as you pay back your debt.

Another great benefit is that there is only one check to send out each month. If you are the type of person that can't keep up with the mounting pile of bills, this will allow you to limit your responsibilities to remembering one check.

And, of course, Credit Counseling Services will help you clear out your debt and build up your credit. The on time, consistent payments will help to improve your credit. Eliminating your debt will also make you appear more favorable to potential lenders in the future, since they take a look at how much debt you have, compared to how much they think you can handle.

There are a few disadvantages of using Credit Counseling Services, however. For one, all of the accounts involved in this process will be closed. Even worse, you are almost never allowed to apply for a new credit card while you are in the program. This means that if you are in enough debt that you will be using the Credit Counseling Service for the next five years, you will not be able to have a credit card for those five years.

Exceptions can be made in certain circumstances, such as the need for a business credit card, but they are very rare. Now, in a way, this is a good thing because it will help you keep from amassing any more debt while you are trying to get out of it. But, of course, life without a credit card can be difficult, as you can only spend what you actually have at that precise moment. This is one factor that you will need to keep in mind before you sign-up with a Credit Counseling Service.

By Christy Patrick