If you have credit card debt problems and are considering using the services of a debt relief agency, you may be wondering what steps are involved in the process toward becoming debt free.
When you meet with a financial counselor, he or she will first determine if your credit card debt problems are eligible for one of their programs. To determine this, you will be asked for the most recent statements from your creditors. The counselor then analyzes this information to determine a reasonable monthly payment based on who you owe money to, the state you live in and the recent activity on your credit accounts. The monthly payment that is established is usually no more than two percent of the debt that you entered into the program.
You are then asked to set up a savings account to begin saving money for future debt settlements. Your payment, which includes the credit counseling agency’s fee, is deducted from your current checking or savings account on the same day each month. It is recommended that you close all credit accounts during the repayment process so that you avoid incurring new debt. It is also to your advantage if your accounts are marked as “closed per consumer request” rather than if a creditor closes them.
After you have saved some money in your separate savings account, the agency will contact creditors on your behalf in an attempt to reach a debt settlement with them. This is a process where the creditor accepts less than what is owed on the account, provided that it is paid off according to the amount that was agreed upon. This can be done in one lump sum or in a short time span, generally three to six months. If a creditor that was part of your original repayment plan accepts a debt settlement, they are removed from it and the account with them is considered paid in full.
When you accept third party help for repaying your debts, you need to be aware that it may adversly affect your credit, although not to the degree that filing for bankruptcy does.
If you are facing financial stress and if you have several debts with high interest rates, you can opt for debt consolidation. Debt consolidation is the process that groups all of the debts that you have into a single large debt and lowers the interest rate on your debts. You can consolidate the debts on your own or else you can also get the help of a debt consolidation company. But if you go to a consolidation company for help, it is better to get the help of reputable debt consolidation companies.
How to get reputable debt consolidation companies
The reputable debt consolidation companies are those which offer reliable help. So the ways in which you may be able to find reputable debt consolidation companies are:
1.Check if the company has affiliation – The first thing that you need to do is check with the affiliation of the debt consolidation company. There are many professional affiliation organizations like International Association of Debt Arbitrators. You can then check with the authenticity of the company. That is, you will have to check if the company is accredited with the Better Business Bureau or the BBB. Other than this, you can also check with the website of your State’s Attorney General.
2.Check if the company is a non-profit one – Generally a reliable consolidation company is the one which is non-profit. Thus, you need to check if a company is non-profit.
3.Check if the company is charging upfront fees – Avoid getting the help of a consolidation company that doesn’t abide by the FTC or Federal Trade Commission’s rule and charges upfront fees.
4.Check if the company talks about the process – A reliable consolidation company is supposed to talk to you about the effect of consolidation on your credit. They are supposed to discuss with you on the debt consolidation process. Generally, good debt consolidation companies also provide you a free counseling session so that you do not incur more debts in the future through better debt management.
5.Consult your friends and family – You can consult your friend and also your family members if anybody had taken help of any reputable debt consolidation companies. They may be able to provide you some information of the companies that will be good for you.
Only reputable debt consolidation companies help you to get rid of debt and they relieve you of the stress of dealing with the creditors and the collection agencies.