Dealing With Your Debt

There are some important facts you should know about credit counseling, debt consolidation and debt management before you decide to any of start these kind of programs. One of the biggest things you should know is that credit counseling is it is structured according to the very same companies you are in debt to, The Banks. The bottom line is that they are mostly going to benefit the credit card companies, not you.

There are a large number of people that think they are better dealing with a non-profit company because it won’t cost any money. If you really think that anyone of these non-profit companies do this because they really care about helping you out of the kindness of their heart and are going to go to work every day for free then you are sadly mistaken. Really think about it would you go to work full time for free if you had a family that depends on you, of course not.

They just don’t use the word profit it is called a donation or educational contribution or some other name in order to charge you a fee. If you read the fine print of the agreement you will find a section that states that the company will also get a portion of your payment from the credit card company. This is known as a fare share and has to be given as a contribution or donation from the credit card company.

C.C.C.S (consumer credit counseling) Credit counseling programs are not created equal by any means. When you sign up with a consumer credit counseling company they become the middleman between you and the credit card companies. You put all of your accounts on the program and only make one monthly payment to the credit counseling company and they pay the credit card companies on your behalf.

This is supposed to make it easier for you to manage all of your accounts. The advantage you get though a credit counseling program is that the credit card companies will lower the interest rates on the accounts but you will still be paying back over 100% of the actual debt. A normal program will last around 40 to 60 months on average. If you are on a credit counseling program right now you should add up your monthly payment and times that by the number of months you will be paying.

When I speak to people that are on a credit counseling program and have them do this they are shocked at what they are seeing. For example I had a client last week who was paying $1,650.00 a month to a credit counseling company for a 60 month program and thought she was ahead of the game. She was paying $1,850.00 in minimum payments on 7 credit cards totaling $75,000.00, so the $200.00 a month in savings was a lot better then what I was paying, she said.

I asked her to take what she was paying to the credit counseling company each month and times that by the 60 months and she did. When she saw the total there was a long silence followed by an Oh my God. For those of you who hate math I will tell you the totals. She was paying back $99,000.00 on a $75,000.00 debt. That means she is paying $24,000 in extra fees to the credit card companies.  She told me that she never thought to add everything up to see what it came out to, she only focused on the fact that she was saving $200.00 every month.

Well, she is no longer on that credit counseling program. There are also a lot of companies out there that end up causing more problems for you because they are not paying your creditors on time. If you make your payment on time and the credit counseling company is late, you will be the one who is held accountable and now risk the chance of being kicked off the program. Once this happens the creditor will raise your interest rates again and you will be left in a worse situation than before.

When you are searching for a company to handle your negotiations with the credit card companies make sure you go and check them out with the BBB (Better Business Bureau). If you see that any company has a lot of complaints against them, then you know to stay clear. This is a very important decision you are making, so don’t rush it. When you are dealing with your debt you should make sure all of you questions are answered and you feel comfortable with the company and their program.