What does a Loan Counselor do?

The loan counselor is a financial professional that works with persons who are either having trouble paying a current loan or are having a difficult time meeting the qualifications required for more traditional loans. To this end, loan counselors attempt to protect the interests of the financial institution while still finding a means of helping people manage their finances in such a way that a financial crisis can be avoided.

For persons who wish to obtain a loan, but have some credit issues, the loan counselor will evaluate the relevant factors of the current and past financial condition of the borrower. As part of the evaluation, the loan counselor will take into consideration such factors as current income versus current expenses, the age of the negative information found on credit reports, and the incidence of late payments over the last year. After review, the loan counselor is often able to suggest lenders who provide loans to consumers with less than ideal credit. While these loans tend to carry a higher rate of interest, the terms are usually reasonable and have the potential to help the borrower improve the credit rating, once the loan has been paid in full.

Loan counseling is also extended to consumers who currently have loans, but find themselves having trouble making the payments. The goal of the loan counselor is to explore options that will allow the consumer to avoid defaulting on the loan. This may include working with the lender to refinance the outstanding balance, creating smaller monthly payments. In other cases, the loan counselor may be able to authorize a short grace period to allow the consumer to catch up the back payments. This is often the case when the consumer has experienced a crisis situation, such as the loss of a job, or unexpected major medical issue. The main goal of the loan counselor in these situations is to preserve the working relationship between lender and borrower if at all possible.

Unfortunately, it is not always possible to overcome a financial setback, and default on a loan takes place. Under these circumstances, the loan counselor will work with the client to begin the process of acquiring the collateral used to obtain the loan, and converting or liquidating the collateral into cash that can be used to settle the remaining balance on the loan.