Benefits of Consumer Debt Counseling

If you find yourself with more credit card debt than you can handle, consumer debt counseling may be able to help you. Here are a few of the benefits.

• The primary service that these counseling agencies provide is to negotiate with the credit card agencies on your behalf. The goal of the negotiations is to get you a lower interest rate and, if you owe any late fees, get them waived.

• The consumer debt counseling agency will use the savings they have negotiated to consolidate all of your payments into one lower payment. Generally you make this payment to the debt counseling service and they disburse the payment for you.

Drawbacks of Debt Consolidation Counseling

While debt counseling can be a huge benefit, there are a few drawbacks to be aware of.

• In many cases, when you enter into debt consolidation credit counseling, the cards you consolidate will be closed. If you think you will need access to the credit available on your cards, think carefully before beginning counseling.

• Your credit report will note that you are in credit counseling for each card you consolidate. This notation will significantly impact your credit score in a negative way and will remain on your report for as long as you are in the program. Depending on how much you owe, this can be several years.

• It can take over 30 days for your first payment to the debt counselling agency to be processed, which means in your first month you may need to pay the agency PLUS your credit cards. Be sure to investigate this if you cannot afford a double payment.

Questions to Ask Before Beginning Debt Counselling

Before beginning any debt counselling service, speak to a representative of the agency and be sure to ask the following questions. A wise idea is to get the answers to these questions in writing, and be sure to read the fine print of any agreement you sign.

1. Are there any fees involved?
2. When I make my first payment, how soon will it be forwarded on to my credit cards?
3. Will my credit card payment due dates be adjusted to coincide with my payments to the credit counseling agency? Will this happen automatically or do I need to call each credit card to make the change?
4. How does your agency make its money? Is any of the income that the debt counseling agency brings in coming from the credit card companies?
5. How will entering into your debt consolidation credit counseling impact my credit?

Conclusion

Credit counseling can help negotiate your interest rates to more affordable levels, and even possibly eliminate late fees. However, credit counselling will also negatively impact your credit report and may require a double payment in the first month. Before you enter into debt counseling, ask yourself if the benefits outweigh the drawbacks.

If you are here, at Debt Counselling Info, you’ve no doubt accumulated some debt that you’re trying to reduce or eliminate.  Doing your homework is a very important and intelligent first step in beginning the process of getting your debt to a manageable level.   Once you begin the process, you’re going to probably want to secure the services of a consumer debt counseling agency of some kind.  Because there are con artists lurking in the shadows, waiting for you to walk into their traps, you have made a good decision by doing some preliminary research.  By educating yourself about the process and debt relief options, you are arming yourself with the basic knowledge necessary to make good decisions as well as recognizing the signs of someone trying to pull the wool over your eyes and take you for all they can.

As you look for a credit debt counseling agency to help you decipher the options available to you, there are several things to keep in mind.  One of the most important steps is to shop around.  Just as you would shop around for a new automobile, you should shop around for a reputable agency and a counselor that you are comfortable with.  In the Recognizing the Signs of a Debt Counselling Scam article, we have accumulated a simple list for you to follow as you hunt for an appropriate agency. We encourage you to take a good look at this list before you go any farther with your endeavor to reduce your debt. Also be sure to see the post entitled Locate a Debt Counselling Agency for additional information about avoiding scams.

Steer clear of any agency that advertises on television

These may or may not be scams, however, the reason to avoid them is simple.  Advertising on television is quite expensive.  Someone has to pay for that advertising.  Who do you think that will be?  Debt counseling agencies that advertise on television pass those expenses on to their clients, often in the form of inflated fees.  It is also wise to avoid agencies who contact you by phone or by sending spam emails.  You should put yourself in the driver’s seat by making the initial contact and shopping around.  Remember, the consumer debt counseling agency you hire works for you.

Be aware of sensational catch phrases

If an agency representative tells you they will ‘eliminate all of your debt in just 30 days,’ watch out, because this is not possible.  The only way to completely eliminate all of your debt is to declare bankruptcy and that is exactly what you are trying to avoid by seeking the help of a reputable debt consolidation counseling  service.  With the right relief options you can realistically expect to eliminate some of your debt and/or reduce it to a manageable level.

Beware the ‘non-profit’ designation

During your search, you will likely come across free debt counseling advertisements from companies claiming to be non-profit organizations.  This should send a red flag up the pole immediately.  Some agencies will claim to be non-profit but actually be for profit.  The profit is gained in the form of high ‘required voluntary contributions.’  This is not to say that all non-profit agencies are scams.  Many are legitimate businesses.  Certainly, a non-profit agency can charge a fee to cover operating expenses and such, however, unreasonable contribution fees, like hundreds of dollars, should set your scam alert device off.  Some of the information we found suggested avoidance of these types of agencies all together.  Other information sources suggested a thorough check into them before signing on. A couple of suggestions for this would be the Better Business Bureau or the National Foundation of Credit Counseling.  Both are reliable sources for verifying the status and reputation of an agency.

Protect your personal information

In the event that you do find yourself discussing debt relief possibilities over the phone or on line, never give out any personal information such as credit card numbers, bank account numbers, social security numbers or even employment information.  If an agency representative calls you and starts asking for personal information to ‘process your paperwork’ or ‘get the process started,’ end the conversation immediately.  The only way you should begin the debt relief process is face to face and only after you’ve researched the company.  This should be common sense in this day, however, people get caught in con artist’s snares everyday by giving out personal information over the phone or on line.

Beware of exorbitant and/or up front fees

Another indication that a scam is in progress is a demand for large fees to be paid up front, before any work has been done.  One of our sources indicates that fees should be based on performance and a percentage of the results.  And that most of them should be charged at the end, not at the beginning.  Another source indicates that you should never agree to an up front fee higher than $20.  If an agency has a ‘fees up front’ policy, hold on to your wallet.  Their main focus is most likely simply getting you to sign on the dotted line and getting your money, rather than what the end result will be.

How much time does the counselor spend with you?

With a reputable agency, the counselor will initially spend a minimum of 30 minutes, ask you many questions and listen carefully to your answers regarding your financial situation.  Then a strategy, tailored specifically to your situation is drawn up. This is how debt counselling takes place.  If the counselor appears to be under some kind of time constraint or appears distracted and not focused on you, it could mean something is amiss.  Also, if he/she spends the whole time telling you about their tested and approved ‘program’ for ‘eliminating’ your debt, you should consider moving on to the next company.  There is no one program for debt reduction.  A successful plan for reducing your debt is one that is created and adjusted to meet the specific needs of your financial situation.

Although this list is not all-inclusive, it does point out some of the major warning signs regarding the debt relief scams known to exist.  Also see the article entitled Locate a Debt Counselling Agency for other important do’s and don’ts.  We hope to add more information here as we grow. We encourage you to look for these kinds of things as you begin your search for a debt counselling agency.

If you’re going to seek outside help with the process of reducing your debt, you’re going to want to find a reputable counselor.  These professionals know the strategies that work or don’t work for specific financial situations.  And hopefully they have the experience necessary in handling these types of financial transactions.  Unless you already have one you trust in mind, the easiest place to begin is with a consumer debt counseling agency.

There are a number of things you should do and shouldn’t do while you are shopping around for an agency/counselor you are comfortable with.  Below is a short list we have accumulated from our internet research.  Following these guidelines should help make the process easier and help to avoid possible pitfalls.

Shop around

First of all, you should shop around for the right agency.  There is a little work involved with this but it will pay off in the long run.  Not all credit debt counseling agencies are the same.  Business philosophies and techniques differ from one agency to the next.  These things factor into how the counselor’s treat their clients and how well they do their jobs.  It may be tempting to save time and just end the search quickly by going with the first agency you find.  However, if you sign on with a company that is more interested in the money they can make from you than an obligation to good customer service, you may end up over paying for inexperience, untimely progress and lower quality results in terms of how much your debt can be reduced.

Don’t approach any company that isn’t a member of a network organization

Two of the largest debt relief network organizations are TASC, The Association of Settlement Companies and NFCC, the National Foundation of Credit Counseling. Agencies that belong to these organizations voluntarily comply with a strict set of industry guidelines designed to protect the consumer and the business.  If an agency doesn’t belong to one of these organizations or one like them, you could be leaving yourself open to become ensnared in some kind of scam.  It would be better to walk away and move on to the next company.  In our research it was recommended that the organizations themselves be contacted for a referral to one of their member companies.

Ask about the agency itself

One of the most important questions to ask is how long the company has been in business.  It is a good idea to avoid agencies that have just recently started up.  Not that a new company will give any less service, but the risk of running into a scam is greater.  Our research indicates that it is better to go with a company that has been established for many years than one that is still in its infancy. Another good piece of information is how much debt the company has settled – obviously, the more, the better.

Fees and Refund policies

Fees should be based on the amount of debt and/or the results.  If the company requires that large fees be paid up front, move on.  There will almost always be some minimal up front fees, but these should be just that – minimal.  A reputable debt counseling agency will have some kind of refund policy that is tied to the end results.  If they are unable to settle or reduce any of your debt, you should be entitled to a refund.  If the fees are strictly based on the amount of debt, they will likely refuse to make any kind of refund.  Our research indicates that some companies will make a 100% refund, while others will refund a percentage.

Commission or Salary

Ask the counselor how he/she is compensated.  The only good answer is wage or salary.  If they are getting paid on commission, the possibility of being steered in the direction of unnecessary and costly services becomes greater.  After all, they do want to make more money.

Get everything in writing

The number one, most important thing you can do is get everything in writing. In the debt counselling industry, there is no such thing as a gentlemen’s agreement.  Business is business and documentation is the only thing that will stand up should any kind of legal issues arise.

We hope you find this information helpful and that it gives you more confidence during your search for debt relief.  As stated above, please be sure to see the articles regarding Debt Counselling Scams and Recognizing the Signs of a Debt Counselling Scam for more information about the do’s and don’ts of locating an agency.

Debt Councelling Info is an informational site dedicated to gathering and presenting credit debt counseling information in one location, thus saving it’s visitors time while helping them to avoid the mistakes that may land them in the middle of a scam.  It is designed to educate visitors by giving brief explanations of debt reduction options, so they will be able to shop around for the right agency, ask all of the right questions and make informed decisions about how to proceed with reducing their debt.

The best part of Debt Counselling Info is that it is 100% free.  No visitor will pay a dime for any of the information found here.  This site merely pools as much information as possible into one location so our readers won’t have to spend a lot of time scouring the internet.  The ideas are presented in a series of articles designed to enlighten and arm the consumer with some of the basic knowledge necessary to ask the right questions and move forward.

The following articles address important topics and information we have found on line regarding debt settlement counseling, debt consolidation counseling and some very important information about the kinds of ‘debt relief’ scams that exist and how to avoid the traps set by the con artists behind them.

Please peruse the following articles before you continue on with your journey towards debt reduction.  We hope the ideas here will save you some time and headaches.

Because of all of this, creditors (particularly credit card companies) are desperate for money and have decided that it is to their advantage to work with their debtors, via credit debt counseling agencies and settlement companies, in order to recover at least some of the money they are owed.  This means that, for consumers trying to eliminate and/or reduce their debt, debt settlement has become a viable option.  If you’re considering this option, you will most likely need to secure the services of a consumer debt counseling agency or debt settlement company.  Unless your creditors are willing to work directly with you, the consumer, AND offer some sort of debt settlement that is to your liking, a debt settlement company is the best way to go.  Their knowledge of the laws and experience in negotiating an acceptable settlement will be a strong benefit.  Our on line sources say a reputable, experienced debt counselor can realistically eliminate up to 60% of your debt and negotiate a reasonable payment schedule for the remainder.  Some online ads for settlement companies claim that they can eliminate 75% to 80% of your debt, however, this is likely inflated and could be a sign of a scam.

Only unsecured debt may be handled in a settlement negotiation.  Student loans and other types of loans using some kind of collateral do not qualify.  The way debt settlement works is fairly straight forward.  You, or a settlement agent on your behalf, negotiates with the debtor to eliminate a portion of the total debt balance and sets up a regular payment schedule for the remainder.

Aside from the fact that a debt counseling agency will do all of the legwork in terms of negotiating with your creditors and filing the appropriate forms, there are several other benefits to using a third party.  First of all, they will immediately put an end to harassing phone calls and pressure from debt collectors.  Secondly, it will prevent some of the embarrassment associated with this type of situation.  Thirdly, you will get some input into making decisions about what you can afford to pay each month for the remainder of your debt.  Most importantly, you are paying them, so they work for you, not the creditor.  A reputable agent will look out for your best interest.

There is one drawback to debt settlement that you should be aware of before you pursue this option.  Your credit score will take a hit when it is all said and done.  The good news, however, is that it will be temporary and not nearly as severe as it would be for a bankruptcy.

There are several things you should be aware of as you begin your quest for a debt counselor.  The first rule for finding a reputable agency is to shop around.  There are literally hundreds, if not thousands, of these companies in existence.  It is important to find one that has been in existence for a number of years and possesses the business ethics and standards that will ensure your financial situation will receive the attention it deserves.  You should always search for an agency that belongs to an established network, like the National Foundation for Credit Counseling or The Association of Settlement Companies.  This will greatly reduce the risk of dishonest business practices.  If you’re lucky enough to find a free debt counseling agency, and they do exist as non-profit organizations, then even better.  You should be careful about these, however.  Check them out thoroughly through the Better Business Bureau or the local Chamber of Commerce.

We will conclude this post by recommending that you take a look at the posts entitled Recognizing the Signs of a Debt Counselling Scam and Locate a Debt Counselling Agency here at this site for more information on what to look for as you embark on your search for a reputable debt counselor.