Credit Counseling: If you’re not
disciplined enough to create a workable financial budget and
stick to it, can’t work out a repayment plan with your
creditors, or can’t keep track of mounting bills, consider
contacting a Debt and Credit Counseling organization. Many
Debt & Bill Counseling organizations are nonprofit and work
with you to solve your financial problems. But be aware that,
just because an organization says it’s “nonprofit,” there’s no
guarantee that its services are free, affordable, or even
legitimate. In fact, some Debt Negotiation organizations
charge high fees, which may be hidden, or urge consumers to
make “voluntary” contributions that can cause more debt.
Most credit counselors offer services
through local offices, the Internet, or on the telephone. If
possible, find an organization that offers in-person Credit
Counseling. Many universities, military bases, credit unions,
housing authorities, and branches of the U.S. Cooperative
Extension Service operate nonprofit Debt and Credit Counseling
programs. Your financial institution, local consumer
protection agency, and friends and family also may be good
sources of information and referrals.
Reputable Credit Counseling
organizations can advise you on managing your money and debt,
help you develop a budget, and offer free educational
materials and workshops. Their counselors are certified and
trained in the areas of consumer credit, money and bills
management, and money plan. Counselors discuss your entire
financial situation with you, and help you develop a
personalized plan to solve your money problems. An initial
counseling session typically lasts an hour, with an offer of
follow-up sessions.
Debt Consolidation Program: If your
financial problems stem from too much bills or your inability
to repay your money owing, a Credit Counseling agency may
recommend that you enroll in a Debt Relief Plan (DMP). A DMP
alone is not Debt Counseling, and DMPs are not for everyone.
You should sign up for one of these plans only after a
certified Debt Counseling has spent time thoroughly reviewing
your financial situation, and has offered you customized
advice on managing your money. Even if a DMP is appropriate
for you, a reputable Debt & Bill Counseling organization still
can help you create a money plan and teach you money
management skills.
In a DMP, you deposit money each month
with the Debt Counseling organization, which uses your
deposits to pay your unsecured debts., like your credit card
bills, student loans, and medical money owing, according to a
payment schedule the counselor develops with you and your
creditors. Your debtors may agree to lower your interest rates
or waive certain fees, but check with all your creditors to be
sure they offer the concessions that a Debt and Credit
Counseling organization describes to you. A successful DMP
requires you to make regular, timely payments, and could take
48 months or more to complete. Ask the Debt & Bill Counseling
to estimate how long it will take for you to complete the
plan. You may have to agree not to apply for — or use — any
additional credit while you’re participating in the plan.
Make sure your protected
Be wary of Debt Negotiation
organizations that:
charge high up-front or monthly fees for
enrolling in Debt and Credit Counseling or a Debt Relief
Program.
pressure you to make “voluntary
contributions,” another name for fees.
won’t send you free information about
the services they provide without requiring you to provide
personal financial information, such as credit card account
numbers, and balances.
try to enroll you in a Debt
Consolidation Program without spending time reviewing your
financial situation.
offer to enroll you in a Debt Help
Program without teaching you financial budget and money
management skills.
demand that you make payments into a
Debt Relief Program before your creditors have accepted you
into the program
