Dealing with Debt: Credit/Debt Counseling
Credit and debt counseling has become a booming business over the last few decades, but you must be careful where you place your trust. You could put your credit in the hands of a company and months later end up worse off than if you had handled it yourself.
Beware of Advertisements
Every day consumers hear and read enticing advertisements from compan
ies that promise to make the collection calls go away, or take care of all your monthly payments for you. All you have to do is give them the payments—plus a fee. They often charge fees in double digit percentages of each payment, and also receive percentages back from your creditor for collecting the money. You could do that yourself and pay your creditors the money the so-called counselor is charging and pay your debt much faster.
Do Your Homework
Credit counselors often give you doomsday-type predictions, such as it will take you half your life to get out of debt. Then they tell you they can save you most of this by handling things for you. However, sometimes they miss payments or send them late, which makes your problem even worse. It pays to check a consolidator’s information yourself using online debt consolidation calculators, such as MSN’s Moneycentral calculator(http://moneycentral.msn.com/investor/calcs/n_debt/main.asp). You simply choose your debt type and fill in the appropriate boxes, and it will give you the right answers (often very different from the counseling service’s answers).
Look Towards a Not for Profit Organization for Aid and Assistance
If you find that you do need debt counseling, try a non-profit organization like National Foundation for Credit Counseling. The offer advice to anyone who comes to them—for free—and you can discuss your problems by phone.
Make sure the organization you hire to give you advice and handle your debt payments does not make your financial situation seem worse than it is, and that they don’t make promises that seem too good to be true—because, most likely, they are.
Learning More About Your Own Debt
Often just the process of filling out forms for a debt consolidation service can help you see where you are spending too much money. If you notice a lot of expenditures for optional things, like expensive hobbies, unnecessary insurance coverage, over-buying at gift-giving times, etc., it may be enough to help you kill your credit cards. Whether you have someone manage your debt payments for you or do it yourself, it will still require cutting back and possibly working a second job. Do you really want to pay someone to tell you that?