If you are inundated with debt you could be experiencing potentially the most stressful event that an individual can go through. Debt can wreak havoc on a marriage, bring about emotional pain and your money problems could lead to some physical ailments from the stress that you are experiencing. Luckily there are organizations, like a credit counseling agency, that you can turn to help you through these financial hardships and lead you towards the path of financial independence.
How can a credit counselor help?
One of the main goals of a credit counselor is to negotiate better terms with your creditors. A credit counselor will also try to enroll a consumer in a debt repayment plan, which can be used as a tool as you approach creditors to get better terms on your accounts.
What exactly is a debt repayment plan or debt management plan?
A debt repayment plan is pretty self explanatory, the credit counseling agency is the distributor of the consumer’s funds to their creditors according to the negotiation. The consumer now pays the credit counseling agency that will distribute the client’s monthly payments according to the newly arranged terms negotiated with the creditors.
Within the negotiation process, one of the main objectives in credit counseling is to negotiate lower interest rates for their consumers. Once the lowest possible interest rate has been negotiated, the agency will distribute the funds paying off the highest interest rate debts first to keep them from stacking up even more debt. The debt management plan has worked for thousands of people but it’s not for everybody. You really have to ask yourself if you really need credit counseling and evaluate if you would be better off doing all this yourself.
The main problem with taking care of your debt yourself-without the help of a credit counselor-is that many times a credit counselor knows how to negotiate with each individual creditor. For example, Capital One is notorious for not working with debt settlement organizations but they do occasionally work with credit counseling. There is the obvious benefit of working with a credit counselor that is proficient in dealing with creditors and knows what to and what not to say. The bottom line is, it is an asset for an individual to get helped from a seasoned negotiator. It’s similar to court; can you represent yourself in a court of law? The answer is yes, but in a high stakes case like you future livelihood, you probably want somebody with expertise in their field to help you.
Why credit counseling?
You really should do your due diligence before you make any major financial decision, same goes for credit counseling. You should probably seek the guidance of professional if you can answer yes to one or more of the following questions:
Is your debt situation starting to affect your relationships?
Has any lender ever denied you of credit?
Are you getting harassing phone calls from creditors that are getting out of control?
You are finding it hard to cope with your debt?
If you have made the decision to obtain credit counseling keep in mind that you have to also do your due diligence on the organization and make sure that they have their scruples intact. It would probably be in your best interest to seek out a non-profit credit counseling agency, but even the non-profits can be a scam so make sure that they are a member of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).
It’s also probably best if you ask for references. Any organization that you’re looking to do business with should provide at least one reference, if they don’t provide any references immediately or dodge the questions in any which way that should be a definite red flag. You should also check out the Better Business Bureau, or your State Attorney General’s office for any cases or complaints filed against the organization in question.
Another thing worth checking is always ask about their fees and make sure that they are forthright in their dealings as far as their fees are concerned. Most legitimate credit counseling agencies don’t ask for an upfront fee, but most have a suggested monthly donation when you are enrolled in a program.
Do not pay for anything up front until the terms of the agreement are clear and concise, and there is a clear expectation of what the credit counseling agency is going to execute.