The thought of enrolling in a credit counseling program (also referred to as a Debt Management Program or DMP) or any other debt management service from a credit card debt relief company can lead to a lot of skepticism and fear.
As you research all of these options, there are various pros and cons of credit counseling, debt settlement, and debt verification programs, but the subtleties of these options can be difficult to pick up on.
To help you better understand your options, consider these five benefits that make credit counseling, in particular, a successful option for paying off credit card debt.
5 Reasons Consumer Credit Counseling Services Work
Lower Interest Rates
The greatest benefit of enrolling in a debt management program is getting lower interest rates on your credit cards.
The lower the interest rates, the lower your monthly finance charges will be, meaning much more of your monthly payment will go toward the principal balance instead of being wasted on interest.
The typical credit counseling client at DebtWave Credit Counseling, Inc. starts with an average interest rate of 18.68 percent. However, once they enroll in the debt management program, interest rates are lowered to an average of 8.99 percent!
One Convenient Monthly Payment
Consolidating all of your credit card payments into one makes it a lot easier to manage your money.
You no longer have to worry about making the four, five, six, or more payments to multiple creditors anymore. You just make one payment each month and allow the credit counseling company to pay your creditors on your behalf.
Closing Credit Card Accounts
Some people may view their inability to continue charging on their credit cards as a drawback to credit counseling. But, if your ultimate goal is to get out of debt, the first step is to stop using your credit cards.
The transition from using plastic to paying with cash (aka buying only things you can afford) is a life-changing experience and can be quite terrifying if you’ve become dependent on your credit cards. Luckily credit counselors are humans too and will work with you to gradually add credit cards to the program as you get used to paying for items like groceries with cash or a debit card instead of charging your credit card.
When comparing credit counseling to alternative services, such as debt settlement and debt verification, credit counseling typically produces the quickest results.
Within 30 days of making your first payment on the DMP, you will see the benefits the program provides – especially as more of your principal is paid off as a result of reduced interest rates. With debt settlement and debt verification, it usually takes six to nine months before your first settlement or resolution is made with a creditor.
Debt-Free Within 3-5 Years
Trying to pay off your debt on your own can be a long and frustrating battle.
Payment amounts, finance charges, and fees can fluctuate each month making it difficult to make progress.
With a credit counseling program, as long as you are making your minimum monthly payment on time, your credit card debt should be wiped out in less than five years.
Since the payment will remain constant (not decreasing over time), you will see much more money going towards the principal balance during the final years of the program.
Questions about credit counseling or need help with credit card debt? DebtWave Credit Counseling, Inc. is here to help!