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credit counseling is it right for you?

9/24/2014

9 Comments

 
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By:  Gordon Thomson

Living paycheck to paycheck
?  Just can't seem cope with mounting bills, being hounded by debt collectors? If this sounds familiar, it may be time to consider the services of a credit counselor.  Reputable credit counseling organizations can advise you on managing your money and debts and help you develop a personalized plan to deal with your money problems.  An initial session typically lasts an hour, and maybe some follow-up sessions and workshops.


Debt Management Plans: If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP).   Don’t sign up for one of these plans unless and until a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money.

How a DMP works: 
The counselor will develop a payment schedule with you and your creditors. Your creditors may agree to lower interest rates or waive certain fees to accommodate the plan. You will agree to deposit timely payments to the counselors trust account from there they will pay your unsecured debts, like credit cards, student loans and medical bills etc. Most likely you will be required not to apply for/or use any additional credit will participating in the plan.


Is a DMP Right For You? Here are some other important questions to ask if you're considering enrolling in a DMP.
  • How does your DMP work? How will you make sure that all my creditors are paid by the applicable due dates and in the correct billing cycle? 
  • How is the amount of my payment determined? What if the amount is more than I can afford? Don't sign up for a DMP if you can't afford the monthly payment.
  • How often can I get status reports on my accounts? Make sure that the organization you sign up with is willing to provide regular, detailed statements about your account.
  • What debts aren't included in the DMP? This is important because you'll have to pay those bills on your own. 
  • Do I have to make any payments to my creditors before they will accept the proposed payment plan? Some creditors require a payment to the credit counselor before accepting you into a DMP. If a credit counselor tells you this is so, call your creditors to verify this information before you send money to the credit counseling agency.

Use Caution When Shopping for Debt Relief Services:  Avoid any debt relief organization whether it’s credit counseling, debt settlement, or any other service that:
  • charges fees before it settles your debts or enters you into a DMP plan
  • pressures you to make "voluntary contributions," which is really another name for fees
  • guarantees it can remove your unsecured debt from your credit report
  • tells you to stop communicating with your creditors, but doesn't explain the serious consequences
  • tells you it can stop all debt collection calls and lawsuits
  • guarantees that your unsecured debts can be paid off for pennies on the dollar
  • won’t send you free information about the services it provides until you provide personal financial information, like your credit card account numbers, and balances
  • tries to enroll you in a debt relief program without reviewing your financial situation with you or  teaching you budgeting and money management skills

Is Debt Settlement the Right Option? When you reach the edge, this is when hiring an expert to help can benefit you greatly. Even if there are people who worked on conquering their debt woes by themselves, getting professional debt relief assistance is more likely to give you the desired results. Especially with something as difficult as aiming for a lower outstanding balance.

Debt Consolidation: If you own your home you may be able to lower your cost of credit by consolidating your debt through a home equity loan or second mortgage. But these loans require you to put up your home as collateral. If you can’t make the payments or if your payments are late you could lose your home.

Rather than take out a costly loan that may produce limited long-term savings, opt for a proven debt relief program from a trusted provider. National Debt Relief one of the country’s foremost authorities on debt consolidation, has been providing debt settlement services for years.


9 Comments
Andrea Robinson
9/3/2014 08:07:09 am

This is a great article on debt relief. I think that a lot of people get taken to the cleaners by so-called debt relief companies.

I love the list of questions to ask yourself before signing up. I have been on the verge before, but didn't feel comfortable doing it. I didn't know what to ask and I was afraid because I heard of so many scams.

I have heard about debt consolidation loans where you put up your home as collateral, but it seems risky if you don't change your spending habits or improve your income.

There are a lot of things listed here that I never knew:
1. Some creditors require a payment before they will even consider a DMP?
2. Companies that promise to stop debt collection calls are probably not actually able to promise that?
3. Some disguise their fees as "voluntary contributions"?

These are red flags that I'm glad to know about.

Reply
Lee L.
10/7/2014 08:27:35 pm

Hey Gordon, are you planning any special series of articles building up to Financial Literacy Month next year? I can see you turning this information into a healthy library of resources for people who might need your services.

I'm going to contact you about the intentions of your site.

Thanks for this resource. Best regards.

Reply
Gordon
10/9/2014 07:11:21 am

Lee,
that is a great idea, I will need to give it some thought and hopefully
create a format that my readers can follow.
Thank you ever so much for taking the time read and comment

Reply
Gordon
10/9/2014 07:23:09 am

Andrea,
Glad I could help
thank you for your comments

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3/8/2021 07:11:14 pm

Your article is very good, content is rich, the sentence is smooth, with proper words. I 'm on top of the world.Thanks for shearing this article.

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Victoria Addington link
3/30/2022 06:16:41 am

It was interesting to know that a credit counseling firm may advise that you register in a debt management plan. My friend is having a problem managing his debts. I think he should turn to a credit counseling service to provide him with the suggestion that will help him with his debts.

Reply



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    Author

    Gordon Thomson

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