If you’re struggling with credit card debt and have exhausted all other options, it may be time to consider getting professional help from a credit counseling company. A reputable credit counseling agency can structure a debt management program with better terms and lower monthly payments.
There are pros and cons to working with a credit counseling company. On the plus side, credit counselors know the rules and policies of your creditors and may be able to negotiate better terms than you would on your own. A good credit counselor will be able to get your outstanding debt reduced and/or your interest rates lowered. The main drawback, apart from the fact that the service costs money, is that restructuring your debt will hurt your credit rating. However, the damage will be a lot less than if you default on the debt altogether.
What to Expect
After an initial counseling session, you will get assigned a certified credit counselor who will work with you to get a complete picture of your financial situation, including all your debt, expenses, and income. Based on this, he or she will formulate a program tailored to your individual needs.
If you agree to the debt consolidation program, the company will begin to contact your creditors to restructure your debt by either lowering your debt, the interest rates, the monthly payments, or a combination of all of the above. Based on the new debt terms they are able to negotiate, you will end up with one monthly payment that you make on your consolidated debt. In most cases, you’ll make this payment to the debt counseling service, and they will disburse the money to your creditors after subtracting their own fee.
How to Find a Reliable Debt Counseling Service
It’s easy to get lured in by ads on the Internet or in print media which promise to cut your credit card debt by up to 40 to 60% and get you debt free in as little as 12-36 months. Unfortunately, many of these companies will be quick to take your money and slow to deliver results. To find a reputable credit counseling company to work with, try following these 5 steps.
- Look in your phone book and/or do a search on the internet for a non-profit debt counseling company in [name of your state or city].
- Select 3-4 companies. Be wary of companies that use a lot of marketing hype in advertising their services. Remember, if it sounds too good to be true, it usually is. Non-profit companies are usually preferable, as are local companies where you can meet with the credit counselor in person.
- Check the companies out at the Better Business Bureau website at BBB.org. Look for companies that feature the BBB Accreditation logo which indicates that they adhere to basic standards for honest and reliable business practices. If you see any negative feedback about the company, drop it from your list.
- Call your top two or three candidates and get information about their services and fees. If you have the time, meet with several companies to get competing bids, so you have several candidates to consider.
- Choose the company which appeals to you the most both in terms of pricing and how customer-friendly they are. Before signing on the dotted line, make sure that the agreement clearly outlines what your monthly fee to the credit counseling service will be, and how much of the monthly payments you make will go to paying the credit counseling service versus your creditors.
Stay Away from:
- Companies that offer a free telephone consultation and then pressure you to enroll in their services. Especially watch out for emotional blackmail tactics, such as making you feel guilty if you don’t sign up right away.
- Companies that ask you to pay high fees upfront or that charge high monthly fees.
- Companies that won’t send you free information about their services before you give them your personal financial information.
- Companies that offer to enroll you in a debt consolidation or debt management program right away and don’t spend time reviewing your financial details.
- Companies that don’t also offer a program to teach you basic money management skills as part of their services to prevent future recurrence of your debt problems.
