Sometimes when you are striving to pay down your debt, a little outside help and advice can go a long way.
These days, a lot of people are turning to credit counseling services. They can be very helpful for people with large amounts of outstanding debt. However, there are a lot of unscrupulous agencies these days that are springing up to take advantage of people in need.
The safest way to find a legitimate credit counseling agency is to go to www.nfcc.org, which is the web page of the National Foundation For Credit Counseling. Choose one of their member agencies; they are nonprofit and certified by the NFCC.
When you contact the credit counseling agency they will ask you to bring in a list of all of your expenses, assets, and income, if any. They will also ask you to bring in letters from all of your creditors – the people that you owe money to.
They can help you negotiate lower monthly payments and reduced interest. They may be able to negotiate a lump sum payoff which will be less than the full amount that you owe. Take note: this does hurt your credit because generally it will be noted on your credit report. However, if you are at the point where you are at a credit counseling service, odds are that your credit is severely compromised anyway, and this may be a solution which helps you to get back on your feet.
The way it works is that the credit counseling agency will contact your creditors for you and negotiate lower monthly payments. You will pay the credit counseling agency a small monthly setup fee and sometimes a fee for each account. So if you are paying off four bills with this method, and they charge $7 each, that would add up to $28 a day.
You would give them the check, and they would make the payments to all of the creditors.
What is the advantage of this method? Well, they can often negotiate lower fees and lower interest rates than you could on your own.
However, you have to look at the plan that they propose and decide if it makes sense for you. Do not feel pressured and if the plan won’t help save you money, or pay off your debts faster, don’t do it!
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