Is 2015 the Year to Tackle Your Debt? 10 Tips to Find Free or Low-Cost Help Beware bad actors In a column in the Delaware County (Pa.) News Network, Markita Morris-Louis, an attorney for a Philadelphia-based nonprofit that helps consumers with debt and financial problems, writes: Lured by promises to reduce their debt loads by 50 percent, debt-burdened consumers often turn to debt settlement companies to help them lower the balances they owe to creditors. Unfortunately, customers of debt settlement companies often achieve little relief, and far from becoming debt-free, many end up in worse financial condition. The federal Consumer Financial Protection Bureau explains how to tell the difference between a credit counselor and a debt settlement company. Find trustworthy help To be safe, get financial counseling from a nonprofit agency. Here’s where to find one: The National Foundation for Credit Counseling is a national network of agencies that are vetted and accredited by the Council on Accreditation. The foundation’s agency locator shows local, regional or national organizations operating near you that provide credit, debt and budget counseling in person, online or by phone. You can get started by submitting information online. The Association of Independent Consumer Credit Counseling Agencies represents independent nonprofit agencies providing credit counseling and debt help to consumers. The agencies are accredited by the Council on Accreditation. Find a member agency here. Other sources of help. The Federal Trade Commission says: Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals. What to expect Trustworthy credit counseling agencies offer help with reducing debt and establishing and maintaining good credit. They can help you set up a budget. With their debt management plans, you may be able to have fees waived and interest rates and monthly payments reduced. But they can’t reduce the balance (the total amount) of debt you owe. Be wary Credit counselors can negotiate with your creditors to reduce your payments by lowering your interest rate or spreading payments over a longer time. But be wary of companies promising to reduce the amount of debt you owe. The CFPB says to distrust debt settlement companies that: … typically offer to pay off your debts with lump sum payments that are less than the full amounts you owe. For example, for every $100 of a loan that a creditor agrees to forgive, the debt settlement company will charge you some portion in fees. If you sign up for a debt management plan, make sure it includes all of your debts, not just some. And be certain that you’ll be able to receive regular reports on your accounts. The National Foundation for Credit Counseling explains in detail how to assess debt management plans and credit counselors. A variety of services Stay away from businesses that only offer debt services, and avoid companies offering “debt reduction” plans. Trustworthy agencies offer a variety of types of help, including: Budget counseling, to help with managing money. Credit and debt counseling, to explain and help improve your credit score, dispute credit report errors, and analyze and prioritize debt payments. Debt management plans, in which you make a single payment to the agency, which pays your creditors and helps you get debts under control and paid off. Nonprofits also may offer bankruptcy help, student loan counseling, housing counseling, and counseling on getting a mortgage or reverse mortgage.
Posted on: Sat, 03 Jan 2015 02:47:45 +0000
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