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Nonprofit Credit Counseling Agencies Think Twice Before You Leap
Nonprofit Credit Counseling Agencies
Think Twice Before You Leap (Part 2)
4. Know About Their Fees
Reputable credit counseling agencies generally offer budget services for
free, but they will charge fees for their debt management plans (DMPs).
The key is to find an agency that has reasonable fees. Linda Tucker,
Director of Education and Marketing for Consumer Credit Counseling
Service in North Little Rock, Arkansas, says a monthly rate of $15-$25
is a reasonable amount to pay and $50 is on the high end. Sometimes fees
depend on the market, so if you live in a state like California or New
York you may end up paying on the higher end of the scale. If you can't
afford their fee even if it is reasonable, ask the agency what type of
help they can still offer? most good agencies won't turn you away.
5. Know About Their Counselors
Find out what type of training the agency's counselors receive. Ideally,
they should be both trained and accredited by an outside source
completely unaffiliated with the agency.
6. Know How Employees are Paid
Don't be too embarrassed to ask if their employees are paid a salary or
on commission. If an employee is paid on commission, then they are more
likely to pressure you into a DMP because they are probably watching out
for their pocket book, not yours. If this is the case, look elsewhere!
7. Know About Their Funding
Non-profit agencies have other sources of funding than just the fees
paid by their clients. Ask from what other sources they receive funding
and who regulates and audits their operations. Are they certified by the
International Standard of Operations (ISO compliant)?
8. Know About Their DMP
If, after careful analysis of your finances, you and your credit
counselor decide a DMP is the best next step, you will need to know what
to look for in a good program. Look for a program that pays your
creditors before the due date. If the agency makes late payments or
misses payments, it will only hurt your credit history.
Also make sure you will continue receiving monthly statements from
either your creditors or the agency. Since it's your credit history on
the line, it's important to know the interest rate, payments, and
balances for each of your creditors.
9. Know How Each Creditor is Involved
Sometimes not all creditors decide to participate in the DMP. It's
important to know which ones don't sign up so you can continue making
payments to them on your own.
During the process of enrolling into the program it's also important to
keep paying your creditors so you are not charged late fees and
penalties. Contact each creditor to confirm they have accepted the terms
of the proposed plan or to verify that upfront payments are required.
Once everything is confirmed, it's okay to start sending your payment
directly to the credit counseling agency.
Know the Difference Between a DMP and Debt Settlement
One final note: a DMP is not the same thing as debt settlement or debt
negotiation, which is very controversial and much riskier. Debt
settlement/negotiation focuses on making a deal with creditors to
forgive a portion of the debt.
Gerri Detweiler, founder of DebtConsolidationRx.com and author of The
Ultimate Credit Handbook, suggests debt settlement is most appropriate
for those who are not able to make the payments of a DMP and who either
can't or won't file for bankruptcy. But not all experts agree on the
value of debt settlement, so if you do choose it as an option do your
research and proceed with caution.
We sincerely hope that these ten tips will help you to decide if a
credit counseling service is right for you and, if so, to help you find
a good counseling agency that meets your specific needs. There are many
less than desirable services out there, so a little bit of research on
the front end will be time well spent. Good luck!
(Read Part 1)
By Amy L. Cooper-Arnold,
CardRatings.com
Staff Writer
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