We all know that debt can be overwhelming and even cause problems among family members due to intense stress and many other factors. If you are looking for ways to get out of debt, then chances are you’ve heard about debt consolidation or debt management plans. We’re going to share some debt consolidation tips with you!
Most Non-Profit Credit Counseling agencies offer a debt management plan, which is also known as debt consolidation, because you make ONE monthly payment to the credit counseling agency, which distributes the money to all of your creditors until they are paid in full. These credit counseling agencies do not make loans, nor do they settle debts. Instead, they have agreed upon arrangements with most lenders, many of which will lower interest rates and waive fees, so more of your payment goes toward the balance rather than interest or finance charges.
Here are some important tips to keep in mind when thinking about debt consolidation:
- It’s important to do your research on a credit counseling agency to make sure they are reputable and accredited by the National Foundation for Credit Counseling (NFCC), the Council on Accreditation (COA), and have an A+ rating with the Better Business Bureau (BBB). Just because an agency is non-profit that doesn’t mean they follow all the rules or they have a good reputation. It’s important to do research and make phone calls. Find out if your friends or family recommend an agency.
- Before you start a debt management plan, you must go through free credit counseling. This can be done in-person, over the telephone, or even online from the comfort and privacy of your own home. During the credit counseling session you’ll be asked for information such as income, assets, liabilities, credit card debts, etc. This will help determine your current budget, and you’ll find out if you have a shortfall (in debt) or an overage (money left over each month). You’ll get a good look at your current financial situation and where you stand. This will help you with your final decision.
- Debt consolidation is not right for everyone. That’s why it is so important to do the credit counseling session first to find out what all of your options are. You may be DEEP in debt and not even realize it, so bankruptcy could be your only option. You could also not be that bad off and find that if you make some changes and cut-backs you could pay off your debt yourself. For a debt management plan to work, the bulk of your balances should be in unsecured debts, such as credit cards. If most of your debt includes other types (student loans, tax debt, child support, old parking tickets, etc.) these debt management plans won’t help.
- You still have responsibilities and work to do even when you are on a debt management plan. Your creditors will still be sending you account statements each month, which you’ll have to monitor, copy, and then send into the agency every 3 months or so. Many Agency reports do not reflect the interest that you’re still being charged, so if you don’t submit them, the balance the agency reports will be different from what your statements say. If you are still getting harassing phone calls, let your agency know, and they will handle it, but you need to communicate with your agency and let them know.
- No more charging on credit cards until you are completely done and off the program. Most likely your credit cards will be closed by the lender once you are on a debt management plan. This is to prevent you from racking up any more unsecured debt while you are on the program. You may not get any new credit cards until you are debt-free. This can be a hard adjustment if you’re used to using credit cards on a daily basis. In the case of an emergency, you’re allowed to leave one card open, which is typically a general purpose account with a low or zero balance.
Consolidating your unsecured debts through a reputable Non-Profit Credit Counseling agency can be helpful, but first you must know where you stand with your finances and what all of your debt relief options are. Your certified credit counselor will be able to give you all of this information and answer any questions that you may have. It’s important that you learn from your mistakes and commit to a life where you live within your means. You will have help, guidance, free tools, articles, etc. from your credit counseling agency to help you achieve this and to remain debt-free.
If you want to take the first step in becoming debt-free, give us a call today at 866-699-2227 or visit us online at www.advantageccs.org to find out how we can help you!