Statistical reports demonstrate that up to 80% of consumer expenses in the USA are on credit and that the most convenient way to shop is to use easy plastic, more popularly known as credit cards. Furthermore, the average debt exceeds $8000 with a typical interest rate of 18.9%.
No wonder there are so many people are now deep in debt. Along with that trend came many debt-relief programs aimed at providing consumers with effective ways out of debt.
Among many debt-relief programs available today, debt counseling is one of the best liked methods by helping more than the average consumers seeking debt consolidation.
Debt counseling is a way of teaching consumers how to administer their income and their expenditure. This program also teaches them how to avoid further debt accumulation.
In essence debt counseling should be a preventive measure for debt accumulation, but the problem is that most people use this after they have already debts mounted up.
With debt counseling, you learn the various ways how to avoid debts. The main focus of debt counseling is to educate consumers regarding their expenses, their balances and their credit score.
All of these factors make a significant impact on the interest rates as well as the types of loan one can take. It is important for everyone to seek debt counseling before they start charging their expenses.
Here is a list of the things your debt counselor can help you with:
1. Debt counselors teach you the whole credit card process.
One of the most important reasons why many people accumulate debts greater than what they can afford is because they not really aware of the actual operation of their credit cards. According to surveys, almost 75% of credit card holders do not know their balances, not even the amount they are paying off each month.
How is that possible?
This happens when consumers attempt to pay only the minimum required balance stated on their credit card bill. That way they are just prolonging the process and accumulating bigger debts through increased interest charges.
The point here is that paying the minimum balance on your credit card does not help you. It may lessen your actual balance owed, but it will simply aggravate the debt situation because of the extra time it will take to finish paying everything off.
With debt counseling, you are made aware of your payments and you are taught how you should go about your balances so that you do not accumulate more debt.
2. Money management is the ultimate tool that debt counselors can teach you.
Debt counselors can give you complete information on money management. Consumers are taught how to manage their spending and their credit card bills.
Debt counseling programs teach you how to be aware of your credit card billing statements each month. In that way you become aware of your expenses and your available credit limit. The key factor is never to exceed your credit limit so that you do not accumulate debts.
The problem most consumers have who are heavily in debt is that they are not aware of their monthly spending, so they tend to exceed specified credit limit.
Keep well in mind that credit limits will most likely keep you on track. Once you go overboard, the chances are that you will find it difficult to re-pay your debts.
3. Debt counselors teach you how to use cash instead of plastic.
Since the appearance of credit cards consumers tend to neglect their real functions. They do not understand that credit cards are not extensions of their income. Any amount used on credit cards still has to be paid.
So if you have been charging to credit cards more than you can pay in a month, you will definitely accumulate more debt.
Additionally, debt counseling will teach you not to use your credit cards when paying for your basic necessities like gasoline and groceries. These items are so basic that you should have included them in your monthly budget. Buying those basic items on credit will only entice you to get more than what your budget permits.
So debt counseling is a very effective way of managing debts. You should understand that debt counseling works better if it is used before running up too much debt hand and not after debt has been accumulated.
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