Find A Consumer Credit Counselor
There are, however, non-profit organizations that charge little or nothing to help you find your way out of your excessive debt.
Consumer Credit Counseling (CCC) counselors are certified by the National Foundation for Credit Counseling (NFCC) or Financial Counseling Association of America (FCAA).
Like the debt settlement companies, they will work with your creditors for lower monthly payments. However, they expect you to use their help to pay the debts off in full. Because working with a counselor from CCC communicates a real intent to pay off debt, many creditors are much more cooperative once they know one of these counselors is on the scene.
What You Bring
Find a non-profit, federally approved consumer credit counselor in your area through the justice department, the NFCC or FCAA.
They will want to know about your income and expenses—such as how much you pay in rent and on groceries every month. They will look at your spending on a granular level and help you create a budget that will let you pay for your life without new credit. They will also help create a personal financial plan to get you out of debt.
The counselors help negotiate new, more affordable payments with each creditor so that you can build a track record of paying on time. This might include lower interest rates, a longer payment period, or resetting the clock on your loan so that it is no longer delinquent.
You will be expected to stick to the financial plan, adding no new credit and making all payments on time. You will also be expected to keep in touch with the credit counselor and let them know if you hit any financial snags so they can help you through them.
Debt Management Plan
With unsecured debt, including credit cards, small medical bills, and debt in collections, the counselors can help with a Debt Management Plan. This service does carry a small fee.
With Debt Management, you decide which of your unsecured credit accounts you want to include in the management plan. Anything you include will be frozen so that no new debt can be incurred.
The counselor helps you renegotiate your payment terms. This stops the collection calls as long as you make the new payments. You send payments to credit counselor every month, and they send payments to your creditors every month.
Again, this is different from debt settlement companies which will take your payments and hold them until your creditors have written off your loan. This destroys your credit. Consumer credit counselors will help you pay off the amount in full, just at a manageable rate.
While on the Debt Management Plan, creditors will mark you as on the plan and it will have no impact on your credit score. Once your debt is paid in full, they erase any mention of the plan and simply mark the debt paid.
Consumer credit counseling offices offer other services including helping customers cope with student loans, helping them qualify to buy homes, offer bankruptcy counseling, and much more. They do not lend money.
How to Spot Scam Organizations
The differences between a legitimate credit counseling organization and a scam are noticeable. A scam operation will:
- Charge you money upfront for their help
- Direct you to a specific product instead of show you all the options
- Promise to raise your credit score by a certain number
- Tell you to do something illegal like changing your identity
Having debt that is out of control is scary and depressing, and often follows life circumstances that were difficult to prevent. Consumer credit counselors understand that. They’re there to help create and enforce a structure that will make sure consumers can get back on track, get out of debt, and regain financial control.