Credit Counseling Facts
These days it seems that credit counselors are appearing everywhere, insisting on helping you out of debt. Credit counseling may seem a good idea if you are in a bad situation. But some credit counseling services can do more harm than good. There are some things you should know like whether you need credit counseling in the first place and how to spot a fraudulent credit counseling service.
Basically credit-counseling services were created to get in touch with your creditors and negotiate lower interest rates and payment plans for you. Some credit counseling companies do a great job renegotiating your debt and are well worth the price you pay. Others will charge you huge fees but leave you wondering when they’ll actually get around to the credit counseling process. The worst-case scenario is that they aren’t a real credit counseling companies at all, they just take your money and by the time you figure it out they’ve disappeared.
The number of people signing up for credit counseling is constantly on the rise. Only about half can be expected to successfully complete their repayment plan, the other half dropping out for various reasons. If you can pay all your bills and keep current on your accounts, you certainly don’t need credit counseling, if your rates are high you can renegotiated that just by asking. But there are a few factors that indicate you are in need of credit counseling. If you cannot pay your minimum payments or are consistently late on one or more bill then you should look into credit counseling. Similarly if you are being hounded by collection agencies or you have been unable to work out a reasonable repayment plan on your own then credit counseling is likely your best bet. Be aware however that if you are too far in debt then even credit counseling may not be able to help, if things are that bad you may not have many choices besides bankruptcy.
Once you’ve decided that credit counseling is the way to go, you should identify some things that indicate the credit counseling company you are considering may not be the most reputable. The best credit counseling services charge around a $10 set-up fee, bad companies are usually charge much more. Unless they are also providing extensive money coaching or other services then beware of large upfront costs. Make sure the credit counseling services are accredited. All legitimate companies are accredited by with either the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. If a company wants to miss making payments to your creditors and keep that money as a fee, they are not a reputable credit counseling service. Missing payments can hurt your credit rating. If a credit counseling company says they can fix your debt with little money and no impact on your credit, look elsewhere. Companies that can actually help you would never make such unrealistic promises.
Subscribe to the comments for this postTips for Avoiding Bankruptcy
While many poeple are deciding personal bankruptcy is the best fix for their financial woes, many are opting for avoiding the process of bankruptcy. Filing for personal bankruptcy can be a great wayto clear one’s plate and give someone a chance to start over, but it is not an easy solution. Bankruptcy can and does destroy credit ratings and can force you to sell the only assets you have. A little known fact of bankruptcy is that it can affect your future employment as well. Not to mention that bankruptcy reform laws made it even more difficult to file for bankruptcy and several limited some of your bankruptcy rights.
In an effort to preserve your credit, it is best that you do what is necessary to avoid bankruptcy. It may not be easy but it will always be worth it. There are websites around that can offer you help in avoiding bankruptcy. Many financial experts offer some great financial advice and some of the following tips for avoiding bankruptcy.
Total all of your debt
The only way to take the second and third steps in avoiding bankruptcy can only be taken when you have an honest and accurate picture of your debt. Put together a list of every bill, statement, document, or anything else that can have an impact on your finances. Figure out your assets and your debts. As an example, the mortgage on your home would be a debt and the value of the home would be an asset. Once that’s done figure out which debts are good and which are bad. Good debts would be things like home loans or student loans. Bad debts are things such as credit card debt, medical bills, or high interest car loans. And while you’re at it list the interest rate and minimum payments for all of your debt.
Reduce expenses
Now that you know how big of a hole you’re trying to climb out of, you need to know how much you spend so make a list of your expenses. Even if it’s a dollar to get a soda at the vending machine, include it on this list. This can then be divided into two lists, necessary expenses and optional expenses. Necessities are the things you need to survive very day, a house payment, groceries, or prescribed medications. Non-essential items are the things you can live without like new clothes or cable television. This is when you add in all those minimum payments you listed earlier. This list is the minimum amount of money you need to pay your bills every month. If you don’t have enough its time to start reducing non-essential items and reducing your spending. Even if you can cover the amount, cutting back on your spending can help you make up for some of that debt.
Consolidate debt.
If you have a lot of small items that you owe then paying them out one at a time is a challenge. By consolidating these debts you’re reducing your payments down to one and can reduce the interest rate so you can pay it off quicker. Another simple way to get out of debt, in addition to consolidating, is to pay more then the minimum payment. After the minimum payment ever cent goes to paying off that debt, so even an extra five dollars can help.
Consult with a credit counselor
This can all be complicated stuff, if you need help totaling up your debt, consolidating that debt, or reducing your spending then don’t hesitate to call a credit counselor. They can help you with money management or find out what kind of consolidation loans you qualify for. Some credit counselors can even help you with a debt management program. There will be fees associated with the credit counselor but it may be necessary to avoid bankruptcy.
Consider debt settlement.
If you have vast amounts of debt that outweigh your income by a considerable amount then you may have to think about debt settlement. A credit counselor can help you with this by dealing with your creditors and negotiating the amount owed. Debt settlement will hurt your credit but not nearly as much as a bankruptcy would. Debt settlement should never be your first option; it’s a very serious decision to make. But if you’ve exhausted all other options, you may have no other choice to avoid a bankruptcy.
It doesn’t matter how or why you got into debt, it is possible to get your finances bank in order without filing for bankruptcy. There can be situations where bankruptcy is the only feasible or reasonable option but its best for your credit and future to avoid it if you can.
Reasons to Consider Debt Consolidation
These days everyone has a debt. Whether it’s a car loan, mortgage, credit cards, even past due utility bills. Debt is a normal expectation of any adult. However, sometimes our debt becomes out of control and overwhelming. It can get to a point that the debt is just unmanageable. This is not unusual unfortunately; almost half of all Americans are living outside their means with an average of $10,000 in debt. Debt consolidation is one of several options you have to remedy the situation.
Debt consolidation is defined as taking more than one debt and consolidating them into one payoff plan. This can be a debt consolidation loan or a refinanced mortgage. Or it may involve a credit counseling or debt consolidation program. There are many reasons that debt consolidation may work for you, but it’s always wise to consider your options.
If you’re considering debt consolidation then one of the best things will be the opportunity to lower your interest rates. Instead of having several difference interest rates, some of which may be high and some may be low, you can obtain one interest rate that is far lower than all the others combined. Also, with debt consolidation you typically will keep the interest rate throughout the length of the loan. Debt consolidation interest rates tend not to fluctuate as much as other interest rates.
When you consider the benefits of debt consolidation a lower stress level has to be considered. Debt can cause a lot of unrest in your life. Debt consolidation can allow you to focus once more on your life, not your debt. When you make the move of debt consolidation you are taking steps to improve your life. Not only will you feel better but your credit will improve, your health will improve and more things will be available to you. Debt consolidation will prove to lenders that they should give you more of a chance than they otherwise would.
One reason debt can be so stressful is the sheer number of payments that you have to remember to make. Debt consolidation completely removes this worry and gives you one payment. Debt consolidation gives you the opportunity to no longer remember which dollar amount is due which day and focus on one affordable payment every month.
Many companies that offer debt consolidation programs have a variety of other services as well. This can be debt counseling, financial management or budgeting help. Most debt consolidation companies offer these things for free so it may be wise to take advantage of them. Then you can start over to a debt free future with a few more resources at your disposal. Anyone can make a mistake and get in financial trouble, what important is doing everything possible to not repeat the mistake. Debt is something that you can’t avoid but you need to know how to live within your means and manage the debt you incur. Debt consolidation is a perfect first step.
Bad Debt Options And Solutions
Having bad debt is something nearly everyone experiences at some point. The fact is no one ever plans to have bad debt , but circumstances and situations change form day to day on our everyday life and sometimes getting overwhelmed by bad debt happens.
The question is how do you mange your bad debt. You will find as many answers to that question as you desire. There are many different approached to handing the issue. However most importantly it is imperative that you examine all your options for solving your problems before you determine the best course of action. Here are a few of the most methods for handling bad debt
You can do nothing
Oddly many people choose to do nothing as if the bill collectors will just go away at some point. Creditors will not stop calling and not answering your phone will not make the go away. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water. This is the worst option.
Bankruptcy
This method is gaining in popularity but it doe shave it downside Bankruptcy should be considered only as a last resort. The results of filing for Bankruptcy protection are long lasting, 10 years on your credit report. However sometimes this is the best option, especially if the prospects for future earning remain dismal
Debt Settlement
Debt Settlement is probably the quickest and least expensive way to get out of debt. Often referred to as Debt Negotiation, Debt Settlement is a direct and ambitious approach to debt reduction and it is best suited for individuals that have considered filing for Bankruptcy protection.
Debt Consolidation
Also called a Consolidation Loan, Debt Consolidation is the replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period. This method requires a disciplined approach from the borrower as many times people quickly get in more debt with other loans. Unfortunately the credit markets have tightened in recent months and if your FICO credit score is less than 660.
Credit Counseling: Consumer Credit Counseling companies are organizations that operate nonprofit financial counseling programs. Typically they will charge a fee for their services and they attempt to work with your creditors in order to reduce your interest rates and your minimum monthly payments. Beware of fraud, recently, some credit counseling organizations have faced examination because of their misuse as a “nonprofit” organization
