| FAQ about debt and credit counseling |
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What do I ask the credit counselor?
A few questions you should ask are:
- How do you determine the amount of my payment?
- How will I know my creditors have received payments?
- How often can I get status reports on my accounts?
- Can you get my creditors to lower or eliminate interest and
finance charges or waive late fees?
- Is a debt-repayment plan my only option?
- What if I can't maintain the agreed-upon plan?
- What debts will be excluded from the debt-repayment plan?
- Who will help me if I have problems with my accounts or creditors?
Bankrate.com has more questions you should ask. Back
to top Are
these e-mails that promise to eliminate my debt for real?
No. Your
debt is your debt -- end of story. There is not a magic wand to wave away your
debt problems. Some of these companies say that they have found a way around the
law -- but if this were true, all credit card companies would be out of business.
Other companies will promise to negotiate with debt collection agencies to get
your debt reduced. But you can do that yourself -- no middleman required. Back
to top How
long will it take me to pay off my debt?
It depends on the interest
rate you are paying and how much you can pay out each month. The more you pay,
the quicker the balance disappears. For example, if you paid only the minimum
amount due on $8,000, which is the average amount of individual household credit
card debt, at an average annual percentage rate of 13.9 percent, it would take
278 months to be rid of your debt. In that time, you will pay $6,792.25 in interest.
If you added an extra $100 to the payment each month the savings are dramatic.
It would be paid off in 33 months, and would cost you $1,639.13 in interest. Use
this Bankrate calculator to figure out how long you will be paying off your debt. Back
to top Will
debt-counseling affect my credit?
Using a debt-management plan to pay
off debt won't hurt your credit score, but it may make it difficult to qualify
for new credit. When you enroll in a debt-management program,
you write a monthly check to a credit-counseling agency and the agency pays your
creditors. A debt-management plan usually lasts three or four years. A comment
stating that you're paying an account through a credit-counseling agency appears
on your credit report and remains until the account is paid in full. Such a comment
won't hurt your credit score in the least. However, if you
get involved with a debt management agency that is late making payments to your
creditors -- or doesn't make any payments at all -- your credit will be damaged.
Have a question you don't see covered
here? Ask
our Debt Adviser, Steve Bucci.
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