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FAQ about debt
and credit counseling
By Bankrate.com
If you're in debt, you're not alone. According to
the Federal Reserve, Americans are in $1.98 trillion of debt --
that's more than $18,000 per household. If your debt is overwhelming,
you can seek help from a debt or credit counselor. But whom do you
ask and how do you know they have your best interests
in mind?
We've gathered the most frequently asked questions
about debt and credit counseling. They should help you on your way
to a more stable financial future.
When
do I know I need debt counseling?
How do I find a good debt counselor
or credit counselor?
What should I be careful of when
consulting a debt negotiator?
What do I ask the credit counselor?
Are e-mails that promise to eliminate
my debt for real?
How long will it take me to pay off
my debt?
Will debt counseling
affect my credit?
When do I
know I need debt counseling?
There is no specific amount of debt -- whether it's $5,000 or $50,000
-- that means you need a debt counselor. You need to consider how
much income you have each month, what your expense are and what
your financial plans are. If you can plan a way to get out of debt
yourself, that may be your best bet. If you feel helpless, overwhelmed
or can't figure out a plan, you may need debt
counseling.
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How do I find
a good debt counselor or credit counselor?
When shopping for help, either for a credit counseling agency or
a debt consolidation agency, keep in mind that just because a company
claims to be nonprofit, doesn't mean they have your best interest
at heart. Be wary of a company that immediately urges you to join
a debt management plan -- they should take an interest in your particular
issues, not throw you toward a cookie-cutter plan. And like any
other big decision, shop around and ask for all prices and fees
to be stated up front and put in writing.
Bankrate has more in-depth
tips on finding someone to assist you with your debt.
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What should
I be careful of when consulting a debt negotiator?
If you're not careful you may find a company that will promise to
ease your debt -- but actually put you further in the hole. Some
debt negotiators charge hefty fees. But that's only part of the
problem. Your credit takes just as much of a hit as your wallet.
Here's why. Often, a debt-negotiating company will
tell you to stop making payments to creditors and to send money
to them instead. The money gets placed in an account until the debt
negotiator decides to make an offer to a credit card company. It
could be several months before a debt negotiator has collected enough
money from you to make a settlement offer to a creditor.
And after several months of not paying your creditors,
your credit will be trashed. Not all debt negotiators are on the
up and up. Some consumers pay high fees and never get any of their
debts settled through a debt negotiator or debt-settlement company.
Contact the Better Business Bureau to see if the firm has had any
consumer complaints. Check with your state attorney general's office
or other state consumer agencies to find
out if there are any pending legal investigations.
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