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Consumers feeling a heavy debt load and paying high interest rates may find relief by engaging a credit counseling service rather than filing for bankruptcy. Credit counseling services are not debt settlement solutions or consolidation loans. Rather, these services are often not-for-profit and offer a complete approach to better managing your budget and reducing your debt.

• Interest Rate Negotiation

Once you have enrolled in the plan, the credit counseling service will contact each of your creditors one at a time and negotiate your current interest rates. If you are subject to penalty interest rates, which can exceed 30 percent or higher, the counseling service will make every effort to have the interest rate lowered to something more manageable, which can be anywhere from 6 percent to 15 percent. The counseling service cannot guarantee acceptance by your creditors of any or all of your outstanding debt accounts into the program.

• Plan Management

Provided the counseling service can negotiate more favorable terms with your creditors, you will be placed on a debt management plan. Your counseling service will indicate to you which credit accounts have been accepted, what the new interest rates are, and what the new monthly payment will be on each account. Additionally, the plan may come with stipulations set forth by the creditor. These may include closing an account or making a committment not to apply for new credit.
Payment Remittance

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