Consumer Credit Counseling Services

In a consumer credit counseling program, you will repay 100% of your outstanding debt, plus interest. Agencies typically lower your interest rate to a set rate defined by your creditors. The creditors themselves, not the credit counseling agencies, determine the interest rates and payment amounts. You then send a monthly payment to the agency, which organizes and distributes your payment to your creditors.

However, credit counseling organizations have faced scrutiny because of their misuse as a "nonprofit" organization. Because an organization says it is a "nonprofit," there is no guarantee that the services provided are free, affordable, or even legitimate.  In fact, some credit counseling organizations charge high hidden fees, or even urge consumers to make voluntary contributions that can cause more debt.

Consumer credit counseling may take six years or longer to complete. Furthermore, your involvement with a credit counseling service could be reflected on your credit report and can stay there for up to seven years. Make sure this is the right debt relief option for you before committing to a consumer credit counseling agency.