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Bad Credit and the Impact of Credit Counseling
The current lifestyle options coupled with innumerable credit cards and easy loan options makes it really easy to fall into a bad credit position.
Credit Counseling
A bad credit is like an incurable disease. It is better to prevent it and very difficult to cure it. You need a good doctor and this is just what ‘credit counseling’ does.
The process of credit counseling works by advising customers about how they can avoid bad debt, i.e. how they can avoid incurring debts that they cannot pay off. It is popularly called as debt counseling in the United Kingdom.
Credit Counseling and Debt Management plan (DMP)
One basic step in credit counseling is to co-ordinate with all the creditors to establish a debt management plan for the consumer. A repayment plan is worked out by coordinating with the creditor.
Debt Management Programs-Special Features:
The first benefit customers realize after joining a DMP is the debt consolidation of all their loans into one. They no longer need to make multiple monthly payments. It is just one payment and they are done.
The second best feature is that this one payment is definitely much lower than the sum of all the payments they were making before. This is because DMP reduces the interest rates charged by creditors. The reduction in payments might be 20% to 30% on an average.
The third major benefit in joining with a DMP is that your ageing accounts once again become current. Your account gets cured and you are back on a current status. Of course, records of your past will not get wiped away but gradually, they will stop appearing on the credit scores.
Credit Counseling-New roles
The trend is slowly shifting from debt counseling to credit counseling. Efforts are being made to enlighten people and prevent them from getting caught in the bad credit trap. Interesting games like the Charge Large Board Game have been introduced to teach school and college students how to pay-off credit to live a peaceful life.
This new approach ensures that the students receive the first few lessons of credit counseling even before they have incurred a drop of credit. That’s really good news!
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