Free Debt Counseling

It is a sobering reality that American consumer debt is nearing 2 trillion dollars while a full 30% of borrowers have had at least one late payment over 60 days. In a difficult economy, those with excessive financial liabilities can find it important, and even necessary, to obtain a free debt analysis. Making changes based on the counseling can provide immediate relief and long term solutions.

Understanding Nonprofit Debt Counseling

The comprehensive debt counseling industry has experienced explosive growth that has paralleled the recession and the rise in unemployment. Free credit counseling services are funded by consumer donations and fees paid by credit card companies, banks and other creditors. They are usually compensated through a percentage of the restructured monthly payment when submitted by the debtor.

Recognizing the Need for Credit Counseling

Early identification of credit problems and the need for debt analysis can save time, money and help avoid catastrophic financial consequences. There are a number of early warning signs that indicate a debt consultation is necessary. These include:

• Making minimum monthly payments on credit cards without affecting the principal balance

• A total monthly debt to income ratio above 35%

• Consistently depleting savings

• Late or missing payments

• An unsecured total liability in excess of 25% of gross annual income

Debt Counseling and Budget Preparation

Debt counseling affords consumers with free educational materials and classes relating to money management and budget development. Course trainers are certified in all areas of personal financial management and can help create a budget tailored for individual circumstances. Initial consultations are used for information gathering and subsequent sessions provide detailed evaluations and progress monitoring.

When completed, the debt counseling process should result in the resolution of the immediate short term debt issues while providing a specific budgetary blueprint for maintaining current payments, saving money and ultimately becoming debt free.

Debt Management

Debt management plans offer relief to consumers who find they are unable to cope with their existing financial obligations. After a credit counselor has reviewed and created a monthly income and expense report, they may recommend enrollment in a debt reorganization plan if the budget process proves untenable.

Instead of paying each bill separately, the debtor pays a single monthly sum directly to the credit counseling service. Prior negotiations with creditors will usually result in lower interest rates, reduced or waived fees and in some cases reductions in principal. The debt couseling agency then submits the agreed upon monthly sum to each of the individual creditors.

Locating Free Credit Counseling Services

Due to the unregulated nature of the credit counseling industry, it can be difficult to find reputable free debt consultants. The National Foundation for Credit Counseling (NFCC) provides meaningful consumer education, alerts and referral services. All Members are certified and held to the highest ethical business standards. Most offer nonprofit debt counseling and debt management services as well.

Free debt counseling provides vital and meaningful solutions for those experiencing a chronic inability to meet their financial obligations.