Debt relief can come in different forms but one of the most common and recommended one is to contact your creditors and work out a manageable repayment plan on your own. However, if you are struggling to pay your significant credit card debt or any other for that matter, you can also consider contacting a debt relief service if you cannot work out a way with your creditors on your own.
- These services may offer credit counseling or debt settlement services depending on the type of your loan, the amount you carry presently and your financial hardships.
- They will also provide you with handsome tips and advice on how you should deal with the mounting monthly bills.
- They will also help you to create a proper plan to repay your creditors.
However, it is important to make sure that a debt relief service that you choose is reliable and reputable and conduct a thorough research about the company before you start working together hand in hand. In order to choose a reliable debt relief service you must check it out with your local consumer protection agency or your state Attorney General. Find out:
- Whether there are any consumer complaints on file about the company
- Whether it is necessary for the company to be licensed to work in your state and
- If so whether or not the company is licensed.
Also, do some homework and find out:
- The types of services the company provides
- Their charges
- The time they will take to work with one or multiple accounts.
You must also make sure that you never rely on any verbal promises. Instead you should:
- Check their rate of success looking at a few of their previous works
- Get everything in writing and also
- Read the contract carefully before signing.
Lastly, visit different websites such as debtquest.com to compare between different service providers, read their reviews and customer testimonials and them choose the most suitable one amongst them.
When all these points are clear, you can confidently do business with the company and look for different options to stabilize your financial situation.
Credit counseling option
Different reputable credit counseling companies can provide you a lot of relief with their advice on managing your money and debts. They will help you in:
- Developing a budget
- Offering free educational materials and
- Offer workshops.
The counselors in these firms are highly trained and certified. They have extensive knowledge in different aspects of debt and money management including consumer credit, budgeting and much more. With you they will:
- Discuss the entire financial situation
- Try to solve your money problems and
- Develop a personalized plan.
This they will do typically during their initial counseling session that may last for about an hour. If need be and your debt condition demands, they will also offer you follow-up sessions as and when required.
Most of the credit counseling companies are non-profits. However, be aware that “non-profit” status. This status does not guarantee that they will offer their services for free. There are high chances that their services are not affordable for you or even not legitimate. In fact, there are a few credit counseling companies that may charge you high fees and hide it from you initially or even urge you to make “voluntary” contributions. Either ways, it will cause more debt for you.
Reliable credit counseling companies will offer their services through local offices, over the phone or online. However, if possible, you should always find a company that provides in-person counseling. You will find such credit counseling services provided by several other sources such as:
- Credit unions
- Military bases
- Housing authorities and
- Branches of the US Cooperative Extension Service.
Apart from that, you may also avail such services from your financial institution itself, the local consumer protection agency, and even your friends and family who may provide you with lots of valuable information and referrals.
Debt management plans
A credit counseling agency may also recommend that you enroll in a DMP or Debt Management Plan, if you find that you have too much of debt and your financial problems have stemmed from your inability to repay your debt.
- A DMP has its characteristic features and it along is not credit counseling. It may not be suitable for everyone as well. Therefore, do not sign up with such a plan until and unless your financial condition is not reviewed thoroughly by a certified credit counselor. It is only then a customized plan can be created to manage your money and debt.
- If you feel that a DMP is just right for you, even then you will need the help of an expert and reputable credit counseling agency to create a proper budget and learn about better money management skills.
In such a plan you will need to deposit a specific amount of money every month with the credit counseling agency. It will pay off your unsecured debts such as credit card bills, medical bills or student loans according to a repayment schedule developed by the counselor with you and your creditors.
Creditors may agree to waive certain fees and lower the interest rates but make sure that it is at par with what the credit counseling agency described to you. A DMP can be successful only when you are disciplined and diligent, make regular and timely payments. It will take a long time to complete and you may even have to agree not to apply for or use any supplementary credit when you participate in a DMP.
Debt Settlement Programs
Lastly, a for-profit debt relief company may offer debt settlement programs. It involves negotiating with your creditors for a reduce payment to settle the account completely with a lump sum paid. You will have to set aside a specific amount of money every month into an escrow-like account to create the fund to make the lump sum payment. However, debt settlement will affect your credit score as you will stop making any monthly payments to your creditors.
Therefore, be wise to choose the right debt relief option and service.