How do credit counselors work?
Credit counseling in India is not such a big business, though it is increasingly gaining a foot-hold in the common man’s consciousness. Sudden loss of jobs, stop on increments, over-spending on credit cards, multiple loans- a few or any of these combinations can bring you to a dead-end called the debt trap.
Before it is too late, approach your lender to make payment arrangements. If the situation is beyond repair, get in touch with a credit counselor.
There have been increasing instances of loan defaults in India recently, due to various reasons such as high interest rates, inflation, loss of job due to companies cost-cutting etc.
In India, there has been a growth in credit to household in recent years. The all-India Debt and Investment Survey 2003 estimates that nearly a fourth of the households were indebted in 2002.
When you approach a consumer credit counselor, they will try and convince the lender to decrease the rate of interest on the loan taken. That doesn’t help you decrease the loan. This means that if your outstanding loan amount is Rs. 1 lakh, this will be the amount payable, not any lesser than that.
Based on a credit counseling agency’s relationship with a particular bank, the negotiation between the debtor (you) and the creditors (bank) could be mediated to get reasonably favourable outcomes. The counselor may do a comparative study of the interest rates offered by various banks and also the terms and conditions of unsecured debt consolidation and choose the best one suitable for you.
The credit counselor also ensures that you get ample time in hand to stabilise your finances and also to pay off your debt in small installments.
But they may not be able to help you in debt consolidation.
So in a nutshell:
* A credit counselor examines ways and means to sort out the current financial crunch.
* They can help create awareness about the costs of misusing credit. This helps improve
the customer’s financial management and develop sound spending plans.
These agencies help the distressed people gain access to the structured financial system, including banking.
What do you need to check?
There are a few questions you need to get answers to before you finalise on a credit counseling agency.
- How much does the credit counseling agency charge for its services?
- Does the agency have due credentials?
- What are the services that the company can offer?
- A question you need to ask yourself. , Before you approach a consumer credit counseling service, have you read the testimonials and reviews of agencies previous or current clients as well as checked their official website?
- Is the credit counselor registered as BBB which stands for Better Business Bureau? This is a quality sign.
