Debt counseling, while it is effective in educating you about your debt is still quite limited in terms of what it can really do for your financial troubles. You need to understand just what this debt relief option can accomplish and what you need to add to it so you can get out of your credit obligations.
First of all, this is concentrated on counseling. That means, you get a debt counselor to look at your finances and see where the problem is. You will rely on their expertise to help you understand what you did wrong and how you can arrange your finances to be able to afford your debt payments. Clearly, that is your priority. The debt counselor can also help you learn how to budget and point out financial management skills that will help you achieve and maintain a debt free life.
As helpful as all of these sound, that is as far as the assistance will go. Of course, you have the option to extend the service further but this will already entail costs. Debt counseling is free but if you want more assistance, you can enrol in a debt management program. For a fee of no more than $50 a month, the debt counselor will help you create a debt management plan that will allow you to make smaller payments every month. This lower amount happens because your debt amount will be paid off over a longer period. The counselor will negotiate on your behalf so your creditor will agree to it. In most cases, they will even ask the creditor to lower your interest rate and if accepted, that can lower your payments even further.
But if you are wondering if that is enough to get you out of debt, the answer to that is yes, but it will depend on your own commitment. In fact, any debt relief program only takes care of a part of the problem. Most of it will be reliant on your commitment and ability to get out of debt.
First of all, you need to have a steady income to afford your debt payments. There is no debt reduction in debt counseling. Although the monthly payment will be smaller, you still end up paying for the total amount of your debts.
You should also stop acquiring debts if you really want to get out of debt through this debt relief program. If you are still incurring debt because you or a loved one is still undergoing medical treatment, then rethink your debt relief option. This may not work well for you.
As you go through this debt relief program, you also have to develop and practice the right personal finance management skills. The debt counselor can teach you what they are but the implementation will be all up to you.
These practices include budgeting and saving. Budgeting involves creating a plan that will show you the income that comes in every month and every expense that it funds. It allows you to monitor if your money is going to your priority expenses.
The other important practice that you have to develop is saving. This will help secure your future and also, keep you from defaulting on your payments. Even if something happens, you can be assured that your debts will be funded.
All of these combined will definitely help make debt counseling an effective option to get out of debt. More important than paying off the debt that you owe is making sure that you will never be in another debt situation in the future.