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Credit counseling may not help New Jersey residents

One in five people who attempt credit counseling actually successfully complete it, according to the National Debt Relief (NDR) recently published article. The National Foundation for Credit Counseling (NFCC) places the successful completion statistic at 26 percent. The NFCC cites that most debtors leave a debt counseling program to seek debt relief on their own.

Credit counseling does have something to offer debtors including lowering late fees, penalty charges and interest rates. The options are intended to lower the repayment amount needed to make debtors’ monthly payments possible. The NDR report consists that this help is not enough for debtors. Other debt relief such as debt consolidation loans and bankruptcy options are more helpful to debtors seeking financial relief. Bankruptcy and debt consolidation loans have a higher completion rates than the 26 percent who complete credit counseling program, claims the NDR report. 

There are many factors that may contribute to the lack of success of credit counseling programs. For instance, it is sometimes hard for the counselors to negotiate with lenders. Some lenders may want to initially provide little to no concessions on debts. Another reason is that a credit counseling program takes self-discipline. For instance, debtors have to make monthly payments each month.

Credit counseling is a great option for people who want to repay their debt. However, it may not be the best option for those who do not have enough money to make the monthly payments. Bankruptcy options are available for those who want to eliminate unsecured debts. Chapter 7 wipes out unsecured debts without debtors, in most cases, have to repay any money. Chapter 13 allows debtors to repay secured debts like a mortgage and unsecured debts like credit cards.

Source: The Times Union, “National debt relief sheds light to the ugly truth about credit counseling,” April 11, 2013, 

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