Looking for help with debt can feel overwhelming. There are many companies online, and they do not all offer the same type of help. Before enrolling in any program, take time to learn about the agency, understand the service being offered, and ask questions.
A trustworthy credit counseling agency should review your full financial situation before recommending a program. A counselor should look at your income, expenses, debts, and financial goals, then explain the options that may fit your situation.
You should also receive clear answers about:
- How the program works
- What your estimated monthly payment may be
- What fees are charged
- How long the program may take
- How and when creditors are paid
- What happens if a creditor does not accept the proposed terms
Be cautious of companies that pressure you to enroll quickly or make promises that sound too good to be true.
It is also important to understand the difference between debt management and debt settlement because they are not the same.
With a debt management plan, you repay your debts through a single monthly payment to a nonprofit credit counseling agency. The agency then sends payments to your creditors. Depending on the creditor, benefits may include lower interest rates, reduced monthly payments, and the elimination of certain fees. The goal is to help you repay your debt in a more manageable way. Typically, a debt management plan is paid off within 3-5 years.
With debt settlement, a company attempts to negotiate with creditors to accept less than the full amount owed. These programs often involve stopping payments to creditors while money is saved for possible settlements. This can have a major impact on your credit because missed payments and delinquent accounts may be reported during the process. Debt settlement companies may also charge high fees, which can add to the overall cost. Balances may continue to grow because of interest and fees, and creditors may continue collection activity or take legal action. Settled debt may also have tax consequences.
Before choosing an agency, check its history, reviews, Better Business Bureau profile, and professional memberships. Membership in organizations such as the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA) can also show that an agency follows established standards and supports professional credit counseling.
You should feel comfortable asking questions and never feel pressured into making a decision.
Consumer Credit of Des Moines has provided nonprofit credit counseling since 1987 and is a member of both the NFCC and FCAA. Our certified credit counselors provide free and confidential counseling to review your financial situation.
Call 800-955-5765 or schedule an appointment at www.consumercredit-dm.com/book.