In this guide we will help you to find out if credit counseling and debt consolidation can help you.
Selecting the Best Credit Counselor
The decision to use the services of a credit counselor to better manage your debt is a commendable one. However if it is your first time using a credit counselor, you may be wondering how to choose the right one or even where to find one that will work with your specific budget. Understanding how to select the best credit counselor will go a long way towards helping you manage your debt and get your finances back on track.
Where to a find a good counselor
There are many ways of finding a competent credit counselor who can help you in managing your debt and prioritizing your spending. If you are seeking credit counseling services for a specific goal such as buying a new home, this can prove to be an excellent method of locating a counselor who can help you meet these specific goals. Home buying agencies and programs exist in almost every State and credit counseling services are usually free of charge. Other places to locate a credit counselor include your local Credit Union, financial institution, University or military base. Additionally credit counselors are available for over the phone counseling and can be located by doing a basic internet search.
How to decide if a company is reputable
Once you have located a credit counselor, you may be wondering how trustworthy they are. After all, you will be handing over sensitive personal and financial information and you need to be certain that the company is upstanding. You can check with the Better Business Bureau for a report of the companies past experiences with other clients. You can also check in with the consumer protection agency and your local State Attorney General’s office. Yet another source is the United States trustee Program who maintains a list of pre-approved agencies which provide pre bankruptcy counseling.
For Profit or Non-Profit
When considering the status of a credit counseling agency, many people automatically assume that a non-profit is the best choice. They feel that a non-profit will have their bet interest at heart and that they may even be affiliated with a charity or other benign organization. The truth is that not all non-profit credit counseling agencies are free of charge or even affordable. In addition some agencies that are actually for profit will use non-profit status for tax purposes. For this reason, it is better to look at a company’s past history of helping their clients rather than choose solely based on for profit or non-profit status alone.
Selecting the best credit counseling agency requires that you perform due diligence on the company you are considering and especially find out their BBB history. In addition it is important to find out what if anything your credit counselor charges to find out whether or not the fees are manageable for your budget. A good credit counselor can help you get back on track with saving and spending as well as assist you in creating a workable budget. Finding a good credit counselor will steer towards positive financial health.
Consumer Credit Counseling Facts
When faced with a debt crisis or simply trying to get finances back on track, it is best to meet with a credit counselor in order to receive guidance and assistance. This fundamental financial resource is widely available from a variety of sources and can be utilized for improvement in finances. Understanding the basic facts about consumer credit counseling can assist you in finding an adequate credit counselor who can help to reduce your debt and stabilize your financial situation.
Where to find a Credit Counselor
Consumer credit counseling is available from credit unions, schools, financial institutions, military bases, and also social service organizations. Many of these services are offered free of charge and can be received by attending local financial workshops and educational sessions. The main purpose of consumer credit counseling is to help each individual create a budget, organize their finances, control unnecessary spending and begin to repay debt. Utilizing the services of a consumer credit counseling agency will help you to regain control of your finances when there seems to be no other solution.
How Counseling Can Help
When facing debt collectors who send correspondence by mail or contact you through repeated phone calls, it can be difficult to know where to turn. There is a large emotional component involved as the situation can lead to feelings of hopelessness, frustration and stress. A consumer credit counselor can offer assistance during this trying time as well as provide a foundation from which to build on. By meeting with a credit counselor, you will be able to have counseling with a certified professional who has experience dealing with a variety of debt situations. Using their guidance and taking positive steps towards change will help to effect a positive change in your financial situation.
How To Choose a Credit Counselor
The National Association of Certified Credit Counselors is an excellent resource to use when attempting to locate a credit counselor. This organization is a non-profit organization that issues credentials for counselors offering credit counseling services. Their members are held to a high standard and must go through training in order to receive their certifications. When selecting a credit counseling agency, it is best to select one that offers a variety of different services such as debt management classes, budget counseling, and educational resources. If an agency tries to pressure you into enrolling in a debt management plan, you should steer clear of that organization entirely. The credit counselor you select should be certified and licensed in your State and should be able to present these credentials if asked.
Consumer credit counseling offers valuable resources for the individual struggling to get out of debt and regain control of your finances. By following the aforementioned guidelines, you will be able to locate a qualified credit counselor and take advantage of the benefits of consumer credit counseling.
Five Alternatives to Filing Bankruptcy
A bankruptcy filing is an extreme solution to overwhelming debt. It should only be used in certain circumstances where there is no other option. Instead of filing bankruptcy at the first sign of debt difficulties, it is better to explore alternative debt solutions. Considering alternatives can help the debtor avoid a bankruptcy filing altogether and regain control of their financial lives.
Debt Management Plan
A debt management plan is one method of avoiding a bankruptcy filing. In this instance, an established debt company will assist the debtor with reorganizing their payments through a structured plan. The plan can last anywhere from three to five years during which time debts are slowly repaid. All payments are made directly to the debt agency and then the agency makes payments to the creditors. In this way, the debtor is protected from having multiple payments and excessive late fees on their accounts.
Many creditors will rather take a portion of the monies owed than receive nothing at all. Often in the event of charged off debt, the creditors will accept 60% to 80% of the entire debt owed. The debtor can call each creditor to negotiate a settlement themselves or use the services of a professional debt settlement company who will negotiate on their behalf.
A debt consolidation can be performed instead of a bankruptcy filing. With a debt consolidation, a loan is taken out and used to pay off outstanding unsecured debt. Subsequently, the debtor is left with one basic monthly payment to repay the loan. This can be an excellent option for debtors who are faced with multiple payments which are all at varying interest rates. A debt consolidation can be performed with the assistance of a qualified credit counseling agency or by transferring high credit card balances to a low interest rate card.
Consumer Credit Counseling
Consumer credit counseling is an important first step when considering a bankruptcy filing. It is in fact so important that it is legally required for all bankruptcy filers prior to filing for bankruptcy. Consumer credit counseling involves meeting with a credit counselor to help identify savings goals and develop a feasible budget. In a counseling session, the credit counselor can offer solutions that best meet the debtor’s financial goals. A meeting with a credit counselor can help to identify alternatives that may work better than a bankruptcy filing to help meet the borrower’s needs.
Do It Yourself Plan
Many individuals have successfully reorganized their finances in order to begin repaying their creditors and establish financial stability. With enough commitment and a solid budgeting plan, it is possible to restructure debt and catch up on past due payments. The key to creating a do it yourself plan is to make it as realistic as possible. Identify major payments such as home and car payments that are inflexible. Then, pick out expenses that can be eliminated such as eating out or buying items that are not on sale at the grocery store. By making small changes, it is possible to find hidden money and apply it to repaying creditors.
Exploring these bankruptcy alternatives can help the debtor avoid a bankruptcy filing which can be a costly and lengthy process.
Essential questions to ask your potential credit counseling company
The debt relief business has become a very profitable enterprise over the last few years. With the increased pressures of the economy and mounting credit card debt companies, there has become a need for professional services which assist in debt restructuring and credit counseling. Choosing a professional service to assist with your debt relief needs is a wise choice; however there are basic questions which should be used to screen your potential company. As not all companies are created equally, it is important to ask specific questions to ensure that your company is legitimate and will work in your best interest.
When initially meeting with your chosen credit counseling agency in person or screening them over the phone, there are some preliminary questions that should be asked. These questions include finding out what specific services are included in their package as well as what fees will be associated with each service. Credit counseling services will usually charge one flat fee for providing a variety of services although some companies may have various packages available. You should also find out whether there will be a written agreement that needs to be signed or whether they simply utilize an oral agreement.
When screening a potential agency, it is also important to find out if you will be working with one specific counselor or a team of counselors. Working with one counselor can prove to be more beneficial as you will have one on one support from someone who is familiar with the specifics of your case. In addition, the personal nature of debt financing can make working with one counselor more appealing. You should also find out if the counselors are certified financial advisors or otherwise accredited. If they are not, you will need to find out exactly how they are trained and what qualifies them to offer you financial advice.
The credit counseling agency you are considering should be able to provide you with some basic information about their company. You will want to find out how long they have been in business and whether they are licensed. You may also want to find out what the source of their funding is and whether or not their agency is periodically audited. This will give you an idea of their credibility and the overall financial standing of their institution
Taking the time to ask these questions is an integral part of the selection process. The credit counseling agency you are considering should be willing to answer all of your questions in a detailed manner. They should ensure that you have a full understanding of their services and fees and the way the process works. The answers to these questions should provide you with some direction as to which credit counseling agency is right for you. If your agency is registered with the Better Business Bureau, you will want to make sure that they are in good standing with very few unresolved complaints. Asking the right questions and doing sufficient research will ensure that you have chosen the best agency to suit your specific needs.
4 Alternatives to bankruptcy filing
The decision to file for bankruptcy is a major one that has long term effects on ones credit report. Bankruptcy is usually resorted to when there are no other means of restructuring debt or if there is simply too much debt to manage in a reasonable time period. Often times though individuals make the choice to file for bankruptcy because they are unaware of other available options. Becoming familiar with alternatives for filing for bankruptcy can better prepare an individual who is faced with this choice.
- The debt relief agency is the industry that has been established to assist those facing bankruptcy. This is a valid option to utilize as it allows one to receive professional debt counseling and debt management from trained individuals. When working with a debt relief company, you will be required to submit all of your personal financial information. The counselor will take a complete overview of your finances and determine what the best course of action is for your particular financial needs. A debt relief company will charge a monthly fee for their services and acts as an intermediary between the debtor and their creditors.
- A law firm is also able to assist with debt restructuring and debt management. It is often easier for lawyers to negotiate favorable terms with creditors than for a single individual. Many law firms offer the services of debt relief and debt negotiation and they take on a function similar to that of a debt relief agency. When considering which law firm to use, it is helpful to check with the Better Business Bureau for a review of their business history. It may also be helpful to request testimonials or to ask to speak to previous clients who they have helped. Working with a law firm to restructure debt can be asset in avoiding the complications of a bankruptcy filing.
- Besides working with a professional debt relief service or a law firm, there are steps that individuals can take on their own to avoid bankruptcy. Depending on their savings and investment accounts, it may be possible to take out loans to pay off high interest credit card debt. Before considering tapping into investment funds, it is best to meet with a financial counselor to determine how this will impact your portfolio. However it is often in the best interest of an individual faced with high interest rate accounts to simply pay them off with a loan from a 401K or annuity account. Although there are taxes for early withdrawal, most 401K plans allow a hardship withdrawal which offers more flexibility.
- Refinancing a home mortgage or taking out a second line of equity on the home is also a valid way of getting much needed cash to pay off overwhelming credit card debt. The interest rate on second equity line of credit is often much lower than commercial rates on credit card accounts and in addition, the payments are usually much smaller. This can be an excellent method for wiping out debt that has become unmanageable.
Utilizing these methods before filing for bankruptcy can assist in avoiding the lengthy process of liquidating assets and the other legal complications that accompany bankruptcy. Although there is no immediate fix, it is possible to find solutions that will work to rehabilitate credit and avoid the stresses of bankruptcy filing altogether.
Difference Between Credit Counseling and Debt Settlement
It is very easy for consumers to get into debt but feel very hard to get out of debt. Consumers feel difficult as they do not realize that they have many options when planning to become debt free. Credit counseling and debt settlement are two options that most of the debtors choose to get out of debt.
Both options have their own pros and cons. Many a time consumer get confused about which option is right for them. Therefore I decided to discuss about both options below to provide you with required information to make an informed decision and successfully get out of debt.
Debt settlement is also called as debt negotiation, which can be performed either by an attorney or debt settlement company. Even you can also take care of the process but it requires certain skills such as negotiation skills, experience in performing such tasks etc.
There are two ways to work out debt settlement process. Before approaching the debt settlement company or attorney, it is important to find out if you have funds available for the debt settlement company working for you with your lender can use during their negotiation process or the consumer must be able to deposit funds into the account reserved by the attorney or debt settlement company every month that can be used by the negotiator in its negotiation.
The benefit of debt settlement is that you can stop making monthly payments to creditors with whom, you want to settle the debt and use those funds to save, and use them during the process of negotiation. To start convincing the lenders for debt settlement, the debt settlement company require you to save at least 50 to 60 percent of the debt you owe. The debt settlement company will start negotiating with lender once the funds are in your checking account. If you have no funds in your savings account, the debt settlement company will start the procedure of debt settlement only after you have certain amount of funds your settlement account.
Credit counseling is also called as debt management. The concept behind the credit counselling services is to save the consumers time and money by combining all your unsecured monthly debt that allows you to make single payment monthly to the debt management company that is providing services.
The main difference between the credit counseling and debt consolidation and debt settlement companies is that, the credit counselling service providers do not consolidate your debt instead take on single payment from you and distribute to different creditors every month. It means, they take your headache of debt management.
The credit counselling service providers will also help you in reducing the debt by negotiating with creditors to lower interest rates and other terms that help you reducing the monthly payments.
Thus depending on your situation and the kind of action you want to take in an effort to clear the debt, have to choose between the debt settlement and credit counseling services.
How to deal with a creditor listing on credit report
Credit report is history that shows your payments habits. If you default on payments, the creditors will report to credit reporting agencies that maintain payments history. If you found a creditor listing on your credit report, then there are chances that you owe money to that creditor or any of its business entities for with the creditor underwrites.
When you find creditor listing on your creditor report, do not overlook as that may hurt your credit score. If you found a creditor listing on your credit report then here are the things that can likely to happen:
Creditor listing appears when you owe money to it or its business entity, pay off: it is likely to list on your credit report when you miss monthly payments. In that case, contact you creditor and speak to them and explain your hardship. Draft an appealing hardship letter requesting to lower the interest rates and monthly payments that can be affordable to pay off the bills. If you are in serious trouble and can not afford to pay on monthly basis, try to negotiate with them and settle you account by paying the amount affordable by you. With debt settlement, you can clear the debt much lower, almost 50 percent of the amount you owe and get out of debt legally.
If you are not sure of the entry listed on the credit report, then verify it whether you owe the dues. Send the debt verification letter to creditor requesting to prove the debt with them. This is important because negative entries on your credit report may harm your credit score and penalty for which you do not responsible is disgusting. If they provide proof of debt then work out with them for repayment plan or debt settlement to clear the debt faster.
If you found the creditor listing for which you are not responsible then dispute the listing with your creditor. Contact creditor and request them to co-ordinate with credit reporting agencies in a process of updating the account correctly. While sending a dispute letter to creditor attach documents which proves your stance and make sure to send them through certified mail with acknowledgment which let you know that creditor has received your letter and when.
If you owe money to creditor and it is for a long period of time then check for statue of limitations before making payments as you can avoid making payments if the account exceeds certain period of time and still the creditor seeks payment. You can use statue of limitation as a defence and make sure to check the statue of limitations of the state you are residing currently.
Basics facts about credit card debt
Due to present crisis, one word that we hear from most of the people is debt. It is because decrease in earning capacity of the individuals by which they are not able to pay their monthly payments like mortgage, credit card debt payments etc.
The reason for this credit card debt is that the average American carries about five credit cards with an average balance of $10,000. There are around 650 million credit card in circulation of which around 50 million pay off their balances every month while 115 million do not pay their balances. The remaining are put unused.
The credit card industry makes their profit from the APR interest rate they charge on credit card purchases. Due to increased burden of debt many people have declared themselves bankrupt in USA. They do so because filling bankruptcy, people can clear all their unpaid expenses but unfortunately they fail to remember that filling bankruptcy will hinder the chances of getting credit in future again.
Fortunately, in this economic hardship time people should be aware of the facts that bankruptcy is not the only way to recover form the debt. Many credit card lenders offer credit card hardship programs to who is suffering from any kind of financial stress.
One might be thinking what actually this credit card hardship programs are? Basically this program is debt settlement agreement with your lender. In this agreement your lender may reduce the APR interest rate that they charge on your balances which leads to reduce in monthly payments which can be affordable to you.
But one must understand that credit card hardship programs will not completely eliminate your debt instead there are several downsides of credit card hardship programs. So, one must make sure to find out the terms and conditions of the hardship programs before availing them. Call your lender to find out the new terms of the programs and find out terms and conditions.
Before availing the credit card hardship programs, one must be aware of certain myths and facts about this sort of programs. This article will try to give out some information about common myths that many people may not have an idea.
One may think that debt which has been reduced by the lender will give you relief and forget about it but it is not the case. In this case you may receive 1099-C tax notice. It means any borrower who benefited by the debt settlement from the lender for amount more than $600 has to file the 1099-C forms with IRS as it considers this settlement as income to borrower. For this reason one must consult your attorney to resolve all the issues related to debt settlement.
Other thing many people think that choosing the credit card hardship programs will not affect your credit score, but this is not the case, as you try to settle the credit card balance you may default the payments for at least two to six months in this case the defaults will affect your credit score. So beware of these things when dealing with credit cards.
Things to be Kept In Consideration Before You Go In For Credit counseling
In the time of economic recession many individuals are being burdened with more of debts and every now and then bankruptcy is being reported. To help them stand back on their feet there is credit counseling. You definitely need the credit counseling if:
- When you find that you can’t even pay the minimum credit card charges.
- In case you are paying late for your utility bills.
- In case you are being constantly hounded by various collecting agencies and creditors.
- In case you fail to crack a negotiated deal with your creditor.
All you need to take care of is, choose the right credit counseling agency or the individual. Few years back, National Foundation for Credit Counseling dominated the scene. It was the non-profit organization which worked with the ultimate aim of negotiating the lower interest rates or the payment plans and helped individuals avoid bankruptcy.
When you are looking out for credit counseling service provider you must watch out for:
- Large Upfront cost: Consumer Credit Counseling Services charges a nominal fee of $10 set-up charges. In case you are being asked more than this to pay. It is a warning bell for you. Many-a-times it has been reported that many companies after the upfront payment vanish in the thin air leaving people all the more in the disgusted situation.
- No official recognition: credit counseling firms which have the certification from Association of Independent Consumer Credit Counseling Agencies or National Foundation for Credit Counseling are the legitimate ones. Other should be ruled out from the list. Thus, ask for the certificate proof. As it concerns your financial security.
- Missing payments: keep a check as to how much is being passed on to the creditors and what is charged by the company as any missed or delayed payment can hamper your credit report adversely.
- Unrealistic promises: if the credit counseling agency makes tall promises don’t be lured. If someone promises you to settle your debts for little money don’t give in easily. No creditor is crazy to settle for much less than what he lawfully deserves.