Have you considered working with a debt counseling firm to get your bills under control? A debt counselor can work with you to get at the root of any spending problems you have, and help you become a better manager of your money. Here are some things to look for when looking for a debt counseling firm.
Debt counseling only works if you are willing to change your behavior. It won’t do any good to seek debt help if you are resistant to doing the work that needs to be done. Digging out of a lot of debt won’t happen overnight, so you have to be committed sticking with the program for as long as necessary.
Debt counseling should be free or low-cost. Some churches or other nonprofits may offer free counseling or have sliding scale fees. But don’t let pricing or nonprofit status be your only criteria for selecting a counselor. Check out the reputation of anyone you are considering working with. Are they affiliated with a reputable membership organization such as the National Foundation for Credit Counseling and have accreditation?
Credit counseling should include help with curbing spending, budgeting, saving, in addition to paying off debt. Ask about workshops or other opportunities to learn more about managing money, such as workbooks or online tutorials.
Avoid agencies that pressure you to sign up for expensive debt management programs or require that you apply for a debt consolidation loan. High-pressure sales tactics could indicate a scam is brewing.
Don’t be embarrassed to get help with debt. Finding a counselor and admitting your weaknesses is better than digging a deeper debt hole that you can’t climb out of.
Consumers can have love-hate relationships with credit cards; they love the convenience and benefits offered by credit card companies, but paying high interest and fees makes it difficult to reduce credit card balances even when paying more than the minimum amount required each month.
Legislation designed to protect consumers is meeting with mixed reactions from credit card companies. Anxious to recoup losses associated with the new rules, some credit card companies are raising interest rates, increasing or imposing membership fees, and are reducing “niche” credit cards tied to retailers and services that reflect consumers’ interests and spending habits.
The economic downturn has caused some credit card issuers to slash credit lines and reduce or charge more for other financial services including checking and savings accounts. While consumers with good to excellent credit can negotiate with credit card issuers and financial institutions, consumers with fair or poor credit ratings may not be able to negotiate lower rates and fee waivers.
Good Credit? Here’s Some Good News
Effective debt management requires paying close attention to who and how much you owe. Credit card companies compete for business by offering low introductory rates to open a new account. These offers can also encourage transferring balances from your existing credit card accounts to your new credit card account. This can be a great way to reduce the cost of debt if:
You can pay off the debt transferred within the introductory period of no to low interest.
Transfer fees (typically 3 to 5% of each balance transferred) plus the introductory interest rate on the new credit card are significantly less than the annual percentage rate you’re paying on your credit card balances.
There are no membership fees or other fees that reduce your potential savings.
You can stop using credit cards once you’ve completed your balance transfers.
Newsweek reports that some credit card issuers are lowering rates they charge during introductory periods and extending the length of the introductory periods, which can vary from six months to a year or more. This can help you pay off credit card balances at less cost.
Bad Credit? Consumer Credit Counseling and Debt Consolidation Programs Offer Solutions
Credit counseling and debt consolidation services may be able to help if you cannot qualify for low cost balance transfer offers or debt consolidation loans. Credit counseling and debt consolidation services typically work with clients to find affordable solutions to repay credit card debt. This process requires reviewing your financial situation and determining how much you can afford to pay toward credit card debt.
Credit counselors can also help you design a cash based budget and negotiate the terms of your debt repayment plan with your creditors. These programs provide the added benefit of debt consolidation because you make one scheduled payment to your credit counseling service and they pay your creditors.
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.