The goal of a credit card counselor is to help you eliminate your credit card debt as quickly as possible. To do this, they focus on two areas.
Let's have a look at what type of budget a credit card counselor will prepare for you and how exactly that will help you accomplish your debt relief goals.
The first step is up to you. You must provide the credit counselor with details of your finances, including, but not limited to pay stubs, mortgage information, car loan details, household expenses, credit card debt statements etc. And if you are not sure if something should be included, hand it over anyway. The debt counseling agency will decide what should and should not be included.
Once the counselor has all of this information they will go over it and prepare what they call a priority pay system. A priority pay system does just what it sounds like it does, it prioritizes the payments that you make every month.
The first group of expenditures that your credit card counselor will have you take care of are your necessities, housing, food, medical and child care. The reason (which is probably obvious) that you take care of these expenditures first, is to create stability in your life and your family's life. You need some solid ground under you to start to dig your way out of debt.
Next, your credit counselor will have you focus on paying your secured debts. Things like your car loan and co-signed loans would fall in this category.
Next comes the credit card debt.
Now, for many folks who seek the
help of a credit card counselor, they are either unable to meet their
monthly credit card payments, or are barely paying the minimum payment amounts required. And
unfortunately, even with a strict budget in place, it is just not
possible to start paying down these debts. If this is the case, your
credit counselor will likely recommend that you consider enrolling in a
Debt Management Plan. This type of plan can be set up and overseen by
the same credit counseling company.
Here's what happens.
Your debt counselor will contact all of the credit card companies
that you owe money and try to do the following...
The goal is usually to have you out of debt within 60 months. If this sounds like something that might work for you, you can receive a free online financial analysis and cost savings estimate from a credit counselor in your neighborhood, or even online if that is more convenient.
Working with a credit card counselor is a great way to get a handle on your finances, and at the same time, start the ball rolling on actually getting out of debt, instead of falling further into it.