Should You Use Credit Counseling Services?

There are numerous credit counseling service providers available to consumers, and thanks to the increasing number of people who are struggling to get out from underneath a mountain of debt, there are new credit counseling organizations created regularly.

Even though the majority of counseling agencies are not for profit- you need to do some research if you are considering signing up for their services. There have been reports of credit counseling organizations keeping your entire first month payment (when you believe it’s going to your creditors), and each payment you make does include a portion of money that’s kept by the credit counseling service (for operating expenses). You might also be surprised to learn that the majority of credit counseling services are funded by credit card companies- so of course, it’s in their best interest to try and get people to pay as much on their debt as possible, even if they aren’t able to afford the payments. Research will help you find a reputable credit counseling agency that really can help you decrease the amount of debt that you have.

Couldn’t You Just Do it Yourself?

Some people argue against using credit counseling services because theoretically, you can pretty much do yourself what they will do for you. A credit counseling agency is going to negotiate payments and interest rates with each of your creditors- something that you could attempt on your own. The agency will take your payments each month (plus a fee for the service) and distribute it to your creditors on time- again, something you could do on your own with discipline. But isn’t it usually a lack of discipline that leads people to a credit counseling service? It’s important to be honest with yourself and if you don’t feel you can keep up with making your monthly payments on your own- you should consider enlisting the services of a credit counseling organization.

Credit Counseling Agency Services

If your situation is desperate enough- the agency will advise you to allow them to negotiate with your creditors on your behalf, and then accept your monthly payments for you.

Other services provided by an agency include general money advice and budgeting tips. Their purpose is to help people get their finances back on track by educating people on better money management.

Credit Counseling Scams

Some of the worst scams involve offers to help consumers fix their credit. Our nation is so entrenched in the use of credit, it is inevitable that many will get behind on their payments. This common malady affects at least one person you know if not you, personally.

Credit card companies, banks, stockbrokers, stores, and other financial institutions make it sound so easy, who could resist. No interest! No payments until July! No annual fee! Just fill in this form and you can buy all the things you really can’t afford!

We are sucked into this system easily, but getting out of debt can be extremely difficult and stressful. The promises of all these credit providers become insults and threats as soon as you cannot pay for all the things they promised you could have when you filled out that form.

Many people do not know how to get caught up. Their situation may have changed since they applied for the credit and ran the bill up. They may have lost a job, had a baby, had an illness in the family, or had some other disaster strike which meant they could not make payments they had once agreed to.

The credit providers don’t offer much help. They offered you the credit. Now they want their money. They didn’t worry about whether they were giving you more credit than you could really afford. It’s not their problem. It’s your problem.

Then, here you are. You owe them money. The collectors are calling and sending you notices threatening to take your house, your car, or ruin your credit rating. They tell you that if you do not pay there will be dire consequences.

Then you see the ad or find the website that says, “Credit Counseling. Let us help you get out of debt and get those bill collectors off your back for you.” You’re saved! Look, it’s even a not for profit organization. They are just there to help me. Where do I sign?

That’s where the trouble begins. Many companies have gotten into this lucrative venture and prey on people who are stressed out and have nowhere to turn. The credit card companies who recruited them so vigorously before have now abandoned them. The government isn’t offering to help. The IRS still wants their taxes. And now the knight in shining armor, the credit counseling service comes to the rescue.

The ad may say “Consolidate your bills into one low monthly payment”, “No Borrowing”, “Use federal law to keep your property from being foreclosed by creditors”, “Wipe out your debts”, “Stop Garnishments”, “Stop Collectors from harassing you”, “Keep your property from being repossessed”, or other equally great sounding phrases that looks just exactly like what you need.

But, don’t get sucked in a second time. If you think the credit card companies sucked you into debt, you haven’t seen anything yet compared to what a disreputable credit counseling company can do to you.

Some of these companies offer to help you eliminate your debt altogether. If you get an email like that, delete it. If you find a website that says that, hit the back button and go somewhere else. Do not walk, run!

Sometimes, the best answer is to negotiate directly with the creditor. Be firm. Tell them what you can actually afford to pay. Do not promise more than you can deliver. They really have to take what you can actually pay if they want you to pay them off eventually. Avoiding them doesn’t work.

Many of these scams do not tell you what they actually charge and their fees can be worse than what you already owe. These companies will try to avoid giving you straight answers to your questions about their fees and have hidden costs they may not disclose at all. They know you turned to them because you are afraid your credit is about to be ruined and that they can pressure you into paying them later.

They also don’t tell you they are receiving a portion of whatever payments you are making to your creditors through them. That’s one of the ways they hide what they make from you.

Some of them will take the payments from you, then not pay your creditors with it on time, or in some cases not pay your creditors at all.

Never pay a credit counseling service an up-front fee to fix your credit or give you counseling or anything else. Many of these companies are only in place to make money from collecting that fee and never provide you with any credit counseling or other services at all. They’ve made their money and gone on to the next victim.

Many credit counseling scams are under investigation by the Federal Trade Commission and those claiming to be nonprofit are being investigated by the Internal Revenue Service and their nonprofit status is in danger of being revoked.

However, our government agencies will not save you. These unscrupulous credit counseling services will change their business names and be right back in business bilking consumers in no time at all as long as there is a buck to be made. Only your common sense can keep you from being ripped off by credit counseling scams.

Check them out with the Better Business Bureau. Search their company name online to find others who have used their service. Do not believe testimonials that appear on their own website or ones they send you in an email. They can just make those up.

Credit Counseling - Learn More

Maybe you’ve gotten in over your head with your debt. It could be that you struggle paycheck to paycheck, and you’re having trouble seeing the light at the end of the tunnel because you can’t keep up with even the minimum payments let alone pay anything additional in order to pay off your debt once and for all.

Advantages of Using Credit Counseling Services

When you feel like there’s no hope financially, before you go for a bankruptcy you should consider a credit counseling service. There are many advantages of using a credit counseling service over attempting to get out of your financial hardship on your own. Advantages include:

• Putting an end to phone calls from creditors looking for money
• Reducing interest rates on each of your accounts, sometimes even setting up your accounts with no interest at all!
• Putting an end to excessive fees, including over the limit fees and late fees
• Feel better because there is a plan of action that will actually make a difference towards paying off your debt.

Questions to Ask Credit Counseling Services Before Joining Program

The first step to getting help from a credit counseling service is to select a service that is actually operating in order to assist consumers. Unfortunately, there are many companies currently operating that claim to be not for profit, but are charging excessive fees and making their services otherwise unaffordable to people who are already struggling to get by. Do your homework first to ensure that you are enlisting services from a real credit counseling program designed to assist consumers with their financial problems.

Ask the credit counseling program several questions before you sign any contracts or otherwise make a commitment to join their program, including:

A request for all services offered by the credit counseling program. Ideally, a program should offer budget assistance, money management advice, and classes that help you regain control over your finances in addition to assistance with setting up affordable payment plans with existing creditors and paying off debt.

Ask if the agency charges for their classes or advice. Credit counseling services should not charge their participants for information and educational services.

Request details on all fees required to use their service. Are their monthly fees? Does it cost anything to set up your account? How much? Make sure the credit counseling agency is licensed to operate within your state.

Ask about the qualifications of the credit counselors. It won’t be as helpful to work with people who are just employees of a credit company- you want to work with a credit counseling program that offers trained counselors who understand how to get your finances back on track, and know how to teach you how to avoid the same situation in the future.

Be bold and even ask how the employees of a credit counseling agency are paid. If they are paid more when the clients (you) purchase or sign up for certain aspects of the program, consider that a sign that they’re going to try pushing you to sign up for programs whether it’s in your best interest or not- since it earns them more money.

Debt Management Programs

Part of almost all credit counseling services is a debt management program. You might consider using a debt management program if a qualified credit counselor has thoroughly reviewed your financial situation- including your debts and income and goals for the future- and has described the program in great detail to you. If you decide to use a debt management program, make sure it’s offered through a credit counseling agency that will also provide you with advice and education.

Tips to Avoid Credit Counseling Scams

Credit counseling is a useful service for anyone with problem debt. A good counseling agency can provide advice regarding money management and debt consolidation. They can also help arrange a repayment plan with your creditors to help you get out of debt. A bad agency can charge excessive fees, pocket money that was intended to pay your bills, and steer you into greater debt than before. Predatory credit counseling has become a multibillion dollar industry, and with the recent passage of the Bankruptcy Abuse and Consumer Protection Act, credit counseling will soon become mandatory for anyone filing for bankruptcy. How can you avoid becoming a victim of credit counseling scams? How can you choose a helpful and reputable credit counselor?

Here are a few tips that can help you avoid becoming a victim of predatory agencies:

# Many agencies claim to be nonprofit, but that doesn’t mean they don’t charge money or work with for-profit companies. Inquire about the fees the company charges. Is there a setup fee? Monthly payments? Does the company keep the first payment, or does some of it go towards your debts? Fees should fall within your ability to pay, and any agency that is trying to help you will know this. A company that charges hundreds or thousands of dollars in setup fees is probably not interested in anything other than your money.

# Ask the counselor how he or she is compensated. A salary or hourly wage is a good answer, but you should be suspicious if they are on commission or earn incentives by steering you towards expensive debt consolidation programs. A good counselor should direct you towards solutions that help you, not solutions that earn them more money.

# Will your creditors work with this agency? Call your creditors directly and ask them if they will negotiate with the specific agency you’re seeing. Counselors often state that they can get your creditors to lower fees, restructure debt or lower interest rates. Can they? Call the creditors yourself to be sure.

# Make sure that you get all of the counselors promises and terms in writing. Anything that he or she tells you verbally isn’t binding, so don’t believe it if it isn’t written down.

# Make sure your agency provides you with monthly reports that state how much you have paid them and who is receiving the payments. Don’t take them at their word that your bills are being paid; verify it.

# Check with your local Chamber of Commerce or Better Business Bureau to make sure that there are no outstanding complaints against this agency. The counseling business is full of fraud, and complaints are common. It’s smart to inquire.

By taking your time, asking the right questions, and doing proper research, you should be able to find a helpful and reputable credit counselor who can help you reduce or eliminate your debts. Thousands of Americans are victimized each year by predatory counseling firms, but there’s no reason why you should become a victim of one. If you have problem debt, you have trouble enough already without looking for more.

What Is Credit Counselling?

Credit counseling is a good resort to manage various debts properly. Generally credit counseling is a professional counseling, provided by various organizations to help borrowers for repaying their debts properly. With the help of these organizations, people can manage their debts and lessen their burden.

Credit counseling helps people to overcome their debts burden. Their counseling enables borrowers to pay off their debts with smaller, monthly repayment that is convenient for everyone to pay. Especially credit counseling is required for those who are confused with various debts and different lenders.

These days, credit counseling services are easily available. Many companies provide this service. One can find out this service from his local communities and over the internet. For providing credit counseling service, some companies may charge fees or some organizations do not charge fees for their services. To manage debt problem properly, it is important to find a proper credit counseling service.

However, credit counseling is the best option for borrowers to prevent all sorts of debt damages. The way a credit counselor works is as follows:

•At first, a counselor evaluates a borrower’s condition and on the basis of that he makes a plan. And this plan helps the borrower to pay off his bills. Sometimes, legitimate counseling service can convince creditors to take less than borrowed amount and arrange a longer repayment period.

•In case of credit counseling, most of the time borrowers do not need to pay their bills directly. But, instead of that, in every month they make only payment to the credit counseling service and that amount is distributed among their creditors in accordance with the agreements they have arranged. All together, their arrangement will help borrowers to lessen their loan load and manage their debt properly.

As it is mentioned before that choosing a right credit counseling company is also important. With help of an unprofessional credit counseling company, a borrower can more get into debts, instead of coming out of it. Even more, such kind of unprofessional companies can misguide borrowers too. Therefore, individuals are advised to choose a credit counseling company wisely. In that case, one can take help of local associations of credit counseling companies. By making some efforts borrowers can make this service remunerative for themselves. Borrowers should check the reputation of various companies, duration of their service, and if possible they can try to get the opinion of their previous clients. At the same time, borrowers should bear in mind that at the time appointment with credit counseling company, it is better to present as much of their documentation and paperwork as possible, like proof of their expenditure, their income, the verification of their debts etc.

Credit counseling is offering borrowers a service that will help them to eliminate all confusion and complication regarding various debts and creditors. To manage debts properly and prevent monthly budget from unnecessary loan load, the necessity of credit counseling is unavoidable.

Ease Your Financial Burden

It is a well-publicized fact that more of us are getting ourselves into greater debt, and this may be true for you. The embarrassment of your financial situation can mean you are unlikely to seek credit counseling or other credit management solutions. Increased house prices and greater cost of living can force you to turn to heavy borrowing. While this works in the short term, it undoubtedly leads to greater financial burden in the future. Is there anything you can do to stop this trend in your life?

Credit Counseling Helps People with Bad Credit.

It is much easier to borrow money now than it ever has been. This can prove helpful when seeking a first-time mortgage or wanting to borrow some money to buy that essential purchase. In the long run, borrowing money at the increased rate you are charged can lead to financial ruin.

Secured credit cards can be obtained with a few simple clicks of a mouse, and you rarely think about the consequences of your actions until it is too late. Credit counseling can help. A credit counselling service looks at your finances and works out exactly how much income and outgoing you have and then creates a repayment plan to help you pay off your debts. They contact your major lenders to agree a reduced repayment rate, in order that you can pay off all of your debts, and, above all, they can help set your mind at ease.

Structured Repayments.

Having many different debts with many different companies causes a lot of debt problems. With payments going out at different times and to different people it is very difficult to keep track; once you miss one payment these things tend to mount up very quickly.

Don’t be embarrassed.

One of the hardest things about contacting a consumer credit counseling service is that you may be too embarrassed about the situation you find yourself in, yet you really don’t need to be. Credit counselors deal with cases like yours on a daily basis, and there is always somebody in a worse situation than your own. The worst mistake to make when considering credit counseling is not considering it soon enough.

Credit counseling does not help consolidate your debts but they can stop debt collectors knocking at the door. They can help with credit repair and they can make people with bad credit rating feel like they are humans again.