The Right Credit Counseling Services

If you’re finding that due to your credit obligations you can’t make ends meet, or even bring them closer to a solution, it may be time to seek the services of a credit counseling agency. They can help you become debt free. Many such credit counseling services are non-profit and may not charge for helping you become debt free. Credit counseling services are there to help you understand how your debt load got to be as big as it is. Not only will credit counseling services show how you can go about solving the more immediate problems of late payments and overdue accounts, but they can work with you to develop a budget, and a better understanding of fiscal responsibility, so that you can become debt free.

The Debt Repayment Plan Solution

If your income is outstripped by your debt obligations, the credit counseling services will go to your creditors and work out a repayment plan that you and your budget can handle, but which still pays off your debts in full. It may take you much longer, up to 48 months, but even at a lower single payment than the multiple amounts you are paying out now per month, it will happen. The credit counseling services will require you to deposit a certain amount each month, according to the repayment plan that they have worked out for you. They will then distribute this to your creditors. Payments must be made regularly, and in a timely manner. This service may be free, or you may be charged a monthly fee that can add up to a significant amount over the time frame of the repayment plan.

While a debt repayment plan solves your immediate problem, it does not erase your debts, nor does it erase your credit history. Creditors are allowed to show that your accounts have been in arrears, that they are now in a credit management program, and they may also indicate what kind of concessions were granted when the debt counselor negotiated your repayment agreement.

But you are rebuilding your credit record by making regular payments on time, and not compiling more debt. Part of your debt repayment counseling or plan, may be that you give up your credit cards completely, or sign an agreement not to use them until the repayment is complete. This makes good fiscal sense, and will show your creditors that you are serious about getting back on top of your finances.

Your Debts

Most consumers’ problems arise from two kinds of debt: the secured and unsecured. Secured debts are directly linked to the asset involved, usually a car, boat or home, possibly even a piece of real estate. Defaulting on these loans means the creditor can repossess the asset involved.

Unsecured debts cover a wide range of obligations for which there is no “real” property to be recovered in the event of a default. This includes services such as medical or dental bills, and credit cards. A debt repayment plan generally will only handle unsecured debts, so it’s important that you understand the credit counseling agency will not be handling the payments for secured loans. You must continue to make these on your own.

Remember, the creditor on a secured loan can take back the “property”, if you default on your loan. If this happens, the credit counseling agency will not handle it for you. Let’s say that you default on a car loan. Not only will they repossess the car, but you will still owe the full amount of the loan, possibly towing and storage charges, and the creditor may very well sell the car for less than its real value. If this should happen to you, go directly to the owner of title to the car, and negotiate selling it yourself, pay off the loan, and make sure that a negative entry doesn’t end up on your credit record.

The same common sense rules apply to your mortgage, if you fall behind on your home payments. Go to the bank or lending institution, and request to negotiate some leeway in your payment schedule. Most lenders appreciate that personal circumstances sometimes prevent you from meeting your obligations. There are various ways in which they can give you a break, including suspending a payment or two, reducing interest, extending the terms of the mortgage so that your monthly payment is lower, and other options. But you should be aware that many of these options may have other financial consequences, such as associated fees, or late charges, which can add a significant amount to the original loan. Ask about the fees involved for any service you are offered. Alternatively, there are housing counseling agencies that deal mostly with FHA mortgages, and some who will assist any homeowner having problems making their mortgage payments. The local office of HUD, the department of Housing and Urban Development can give you a list of the agencies in your area.

If you need to find the services of a credit counselor, take along a list of questions, so that you get all the information you need to make the best choice. The two areas to concentrate on, are their Services, and Debt Repayment Plans.

You might like to ask some of the following:

Services-Getting Them, and at What Costs

• What services do you offer, and what are the charges for them?
• How do you calculate what you charge?
• Are those all your fees, or are there monthly ones too?
• Do I have to pay up front before you’ll help me?

Credit Counseling As A Business

• Are you an independent, or do you receive funding?
• Does your agency have a regulator, and do they audit you?
• How are your counselors qualified? Do they have degrees or certification?
• Do you have information packages, and where can I get them? Is there a fee?

The Personal Side of Using Credit Counseling

• When can you start helping me?
• Will I have to deal with more than one counselor?
• Can you help me avoid getting into this kind of problem in the future?
• Will I have to sign a contract?
• Is my personal information going to be kept confidential?

Repayment Plan Basics

• Is the debt repayment plan my only choice?
• How does a debt repayment plan work?
• How deep in debt do I have to be before you’ll help?
• How do you calculate my payments, and what happens if I can’t afford it?
• What happens if I can’t keep up with the repayment plan agreement?
• Which debts aren’t included in the plan, and can you help me deal with them too?
• Can you get my creditors to lower interest or payment amounts, and waive late fees?

Staying On Top of Your Repayment Plan

• Can I be sure my creditors are paid regularly and on time?
• Do you keep separate accounts for you business and for client monies?
• How often can I get updated reports on my account?
• Do you have Internet access for information, or do I have to phone?
• Can I call you if I have problems with my creditors or accounts?

This information will help ensure that you choose the right credit counseling services.