By Beth Fontaine
Overview
Dozens of companies are vying to assist you with your debt issues. Take caution with whom you choose to help; many companies will end up making your situation worse than when you first approached them.
Credit Counseling
When looking for help with debt online, the first thing you should consider is credit card counseling. It would be foolish to jump headfirst into a debt management plan or debt negotiations when the key to getting on track could be right under your nose. Often, it takes a trained professional and an objective eye to catch ways you can fix your financial situation. Beware of hidden fees, and don't blindly trust an agency just because it's a nonprofit organization; use common sense.
Debt Management Plans
After talking to a certified credit card counselor, you may decide to enroll in a debt management program, or DMP. Through a DMP, you send money monthly to the credit card counseling organization, which then sends it to the credit card agencies. Counselors negotiate with these credit card agencies beforehand to work out reduced monthly rates and lower interest rates. However, double-check with each credit card agency individually to ensure everything is correct.
Debt Consolidation
With considerable debt, you may choose the risky practice of debt consolidation. They lower their debt and simplify payments through a loan that places the borrower's home as collateral. In addition to interest, other fees apply. However, there could be tax advantages to this debt solution.
Red Flags
Beware of companies that charge excessive upfront or monthly fees for participating in credit card counseling and a debt management program. Companies that refuse to send free information about their operations should be avoided as well. Credible companies should review your financial situation and administer budgeting and spending advice before enrolling you in a program. Say no to a debt management program that works out a repayment plan without the approval of all creditors.
Do Your Homework
Before choosing a credit card counseling company, debt management program or debt consolidation company, learn everything you can. Contact your state's Attorney General office, your local consumer protection agency and the Better Business Bureau. Find out from the AG's office whether these agencies are required to be licensed in your state, then determine if they are. Stay away from credit report "cleanup" agencies that charge you to remove inaccurate information or outdated information on record. You have free access to this information by law and can resolve these issues yourself.
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