A credit counseling service acts as an intermediary between a consumer and their creditors – developing a payment schedule and using the consumer’s monthly deposits to pay off unsecured debts.

Advantages:

• Credit counseling services negotiate with creditors to reduce a consumer’s interest rates and fees on their debts.
• Consumers will make one payment to the credit counseling agency, instead of paying multiple creditors.
• In some cases, debt collection calls stop immediately.

Disadvantages:

• Oftentimes, credit counseling only offers minor interest rate reductions. Consumers will pay back the full balance of their debt, plus interest.
• Non-profit consumer credit counseling organizations are funded and supported by credit card companies, creating a potential conflict of interest.