Credit counseling can help you evaluate your financial situation and understand the causes for your financial troubles. Credit counselors can discuss the severity of your finances as well as provide information on possible options for improving your financial situation.
Credit counselors understand the intricacies of credit cards. They know how to create strategies for lowering your interest rates which can in turn lower your minimum payments. These strategies are things you can do on your own, if you have very good credit and can make higher minimum payments initially to show financial strength.
For the rest of us, credit counselors are able to create individual debt management plans, or DMPs. DMPs are solutions that allow you to make one consolidated payment each month that is distributed to each one of your creditors every month.
What makes a DMP work is creditor participation. Many creditors understand that they will lose money if you default on your debt. They are willing to help you avoid bankruptcy, if you are willing to give up the use of all of your credit cards (most still allow one open account for business or emergency use). They will typically agree to lower your interest rates and lower your credit card payments as long as you are committed to the structured repayment strategy of your DMP.
If you request lower payments on your own, you will likely be denied. Creditors are unwilling to lower interest if they deem you to be a high credit risk. An exception is made if your credit counselor submits a proposal to your creditors announcing your enrollment in a debt management plan.
A DMP is a commitment. Creditors want to know that you are committed to repaying the debt before they are willing to give you lower payments. The reason that so many creditors are willing to grant you lower interest rates and lower payments is that they actually created the debt management plan many decades ago. They created this tool and the system of credit counseling so that there was a way to help cardholders avoid default.
If you have excellent credit and can make higher minimum payments, you can follow strategies to lower your interest rates to the point that your required minimum payments will drop. If your credit has already been blemished or you can barely even afford your minimum payments, then you should definitely contact a credit counselor to find out why they are often willing to lower your credit card payments when you commit to a DMP. They can further explain this special relationship with your credit card companies that allows for lower interest and lower minimum payments.