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.
