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How to Use a Credit Counseling Service to Get Out of Debt
Posted By Ron On March 14, 2013 @ 6:00 AM In Debt,Personal Finance | Comments Disabled
Credit counseling services, also known as debt counseling services, are agencies that provide debt management and debt consolidation services. Many credit counseling services operate as nonprofits. You should never work with a for-profit service. Generally, these services will only work to help you get out of bad debts, such as credit card  balances, and won’t help you consolidate debts such as student loans or auto loans.
Fifteen years ago, my wife and I signed up for credit counseling through our local YWCA because we were, quite frankly, out of control financially. It was a tough decision to go into credit counseling – I personally felt that I had failed my family – but I am very glad I did enter counseling. They were able to negotiate  with my creditors on my behalf and my interest rates on all but one account were reduced to zero. Yes zero. You can make a lot of rapid progress paying down debt when your interest rate is nothing!
When you go into credit counseling you turn over your debt to a third party whom you then repay (with interest) each month. Credit counseling services will also work with you to come up with a debt management plan (DMP) to consolidate and pay off your existing debts. Typically, their programs work like this:
In addition to helping you pay down your existing debts, credit counseling services also offer debt counseling, or debtor education. Working with a counseling service can help you resolve your current debt problems and learn how to prevent getting back into debt. The debtor education that most counseling services provide includes:
Some people fear that working with credit counseling services will harm their credit score  and mark them indelibly as debtors. This is somewhat of a myth. Working with a credit counseling service can actually improve your credit score  in two ways:
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