Credit counseling is offered for people with debt which is still a manageable amount. By using some professional advice you will be able to pay off your debt without affecting your credit score in a bad way.
There’s another breed of debt relief companies you may encounter as you’re trying to figure out what to do about your debt – debt negotiation companies. Unlike debt settlement firms, debt negotiation companies don’t promise to help you pay off your debts completely. Instead, these companies typically say they can help you get a lower interest rate or monthly payment on your credit cards by negotiating with your credit card company. Of course, they charge a fee for this service.
Some debt negotiation companies have called consumers on the Do Not Call list. These debt negotiators may say they’re from “Card Services” or something similar making it seem like they’re affiliated with your credit card issuer, when they’re actually not.
Drawbacks to Using Debt Negotiation Companies
Many consumers have had several problems with debt negotiation companies. The debt negotiator may reduce the cardholder’s interest rate by negotiating an accelerated payment plan that requires higher monthly payments, payments the cardholder may not be able to afford. Or, the debt negotiation company, after collecting a fee, comes back to the cardholder saying the creditor did not agree to a reduced interest rate. The company would then refuse to refund consumer’s money because they’ve technically kept up their end of the deal – to offer a lower interest rate to the creditor.
Like some other debt relief related companies, debt negotiators typically don’t (more…)
Debt settlement is just one of several options for dealing with debts, and may not be best suited for everyone. There are a few alternatives to debt settlement, so before you go through with debt settlement, and deal with the possible negative side effects, it’s important to make sure it’s actually what you need for your debt.
Can you afford to make your minimum monthly payments right now?
If you’re comfortably making the minimum monthly payment on your credit cards each month, then debt settlement may not be the solution you need. By paying the minimum on your credit cards, you’re probably not hurting your credit score. When you stop making these minimum payments, which is almost always a condition for debt settlement, your credit score will likely suffer.
If you’re making the minimum payments and you can afford to make a little more, then you might consider a debt snowball where you send a higher payment to one of your credit cards each month (while making the minimum on all your others) until that card is paid off. Then, you’ll do the same thing for another credit card. Repeat until all your cards are paid off.
When you’re making your minimum payments, but feel the pinch in your budget, you may consider consumer credit counseling. Credit counseling agencies talk with your creditors to negotiate a lower (more…)
If you’re looking for a solution to your debt, you’ve probably come across credit counseling as an alternative. When it comes to debt, there is no one-size-fits-all solution. Credit counseling may be an option for some people and debt settlement may be a viable alternative for others.
What is Credit Counseling?
Credit counseling is a service that can help you manage your credit card payments. They can often help lower your monthly payment by working with credit card issuers to lower your credit card interest rates. Generally, credit card issuers already have a set interest rate that they’ll give to consumers who work with credit counselors, so these agencies don’t necessarily have to negotiate a lower interest rate for you.
Once you’re signed up, the credit counselor will likely put you on a debt management plan through which you make regular monthly payments to them and they, in turn, send your payments to the creditor.
It can often take three to five years, and sometimes more, to completely pay off your debts while you’re on a credit counseling’s debt management plan. In the meantime, (more…)