Credit Counseling FAQ - How Is Your Creditor Paid?

Few of the Credit counseling FAQ are discussed here. These questions and answers will help you better understand the credit counseling process and how you can benefit from one if you are struggling with debt or would like to plan your finances well. This article also discusses how a creditor is paid through a credit-counseling agency.

A much asked credit counseling FAQ is 'What are the services offered by a credit counseling agency?'

The Solution: As a consumer seeking to benefit from this service, you would definitely like to know what the basic functions of the agency are. The services are as follows,
• They assist you to take control of your finances
• They eliminate your debt with the help of a successful DMP (Deb Management Plan)

DMP facilitates you to make reduced payments by reducing the rate of interest charged by your debtors.

'How are my creditors paid?' is another often asked Credit counseling FAQ.

The Solution: Once the creditors agree to the agent's DMP proposal, you begin making payments to the counseling agent who is aiding you. The credit counselor now disburses the payment to each of the creditors on your behalf in accordance with the plan. Usually he keeps you updated through phone or mail regarding the payments received and the repayments made to your creditors.

Most of the government recognized agencies are non-profit institutions. Some are even rated A+ by BBB (Better Business Bureau). But that does not mean that they will not charge you anything for the service provided by them. However, they should not charge you more than 20% of your monthly payments. Some agencies deduct the amount from your monthly payments while others use your first monthly payment as their fee.

Another common credit counseling FAQ that is usually asked is 'How do I decide whether I should directly pay my creditors or whether I should do so through a DMP?'

The Solution: If you have off late been unable to make payments on time, or not making them at all, a DMP is most certainly be of help to you. Through a DMP, you are entitled to lower payments and you can meet these payments without much strain on your budget. Making higher amount payments means that you pay a higher principal amount through over limit fees and reaging of your accounts. A budget plan can help you realize whether you can directly pay your creditors or choose to register for a DMP.