Finding Qualified Help for Eliminating Debt: 5 Steps

SOS-Debt-Help

The following is a contribution from Jerry at Repaid.Org. If you’re interested in contributing to Frugal Rules, please see our guidelines and contact us.

 

If you are reading this blog, there’s a good chance you’re trying to be more frugal in order to reduce the debt in your life. Most of the advice on the web regarding debt assumes one thing: you’re able to handle your current debt load to some extent. But all too often you’re the one being handled by your debt, not the other way around. In that case, you may need some professional assistance. That help is available nationwide. Unfortunately, you will have to sort out the scam artists before you can find a legitimate company that is qualified to help you. Here are a few tips that you can use while you are looking for the right credit/debt counselor.

Eliminate the Debt Scammers

Your first step should be to search one of three major resources: the trade groups Association of Independent Consumer Credit Counseling Agencies and the National Foundation for Credit Counseling. The members of these two groups agree to follow fair business practices, take continuing education, and employ only accredited counselors. A third resource is the U.S. Department of Justice. The department maintains a list of approved credit counselors. Even if an agency appears on an approved list at any of the listed urls, you need to follow through with the steps that come next, if only because mistakes can be made at any level.

Cross-Reference with Public Databases

The Better Business Bureau keeps an exhaustive list of any and all complaints made against a business, whether they are a member or not. Most of this information is available online, free of charge, through the BBB website. Cross-reference any and all prospective services from the list above with the BBB database. Obviously, high numbers of complaints are a red flag, especially if the business has a low BBB rating or isn’t BBB accredited at all. Additionally, each state’s attorney general keeps a database of complaints. You might want to give them a call as well. The time and effort you put in at this stage of the game could be crucial to the fruition or failure of your debt-free dreams.

Understand The Services

Most legitimate credit counselors will give you some advice for free. Advice is all that you will get for free, though. They are a for-profit business, in most instances. If your problems are severe, the counselor may recommend that you participate in a debt management program (DMP). A form of debt consolidation, these programs are designed as a buffer between you and your creditors and potential bankruptcy. Unfortunately, they are limited to unsecured credit in most cases. They usually cannot help you with your mortgage or your auto loans. Additionally, the reduced interest rates and lower payments will negatively affect your credit score. The program will also cost you. You will have to pay an initial fee of around $50 plus 5-10 percent of your program payment. That portion is normally capped in the $50 neighborhood as well. Also keep in mind that non-profit credit counselors are not automatically more reputable than for-profit ones. Make sure to vet any service before you move forward with them, even if they are a non-profit.

Question Everything

You need to have plenty of questions answered before you sign up for any debt related program. Ask about the number of clients currently enrolled in a debt management program. It’s not necessarily a good sign if most of their clients are enrolled in one. A good mix is 50/50, because that shows the agency tries to help with other methods. Get clarification about the specific help that you will be getting. If that help does not include skills and tools to help you change the way you deal with debt, you could face the same issues in the future. Ask if their counselors are certified and by whom. Ask if the agency is accredited and by which agency. Ask what the program will mean to your credit history. The right answer is, “It’s hard to tell, but it could be negative.” The wrong answer is any attempt to brush off the question, or worse, telling you there will be no issues.

Shop Around

Finding the credit counselor that’s right for you is like everything else – you have to shop around. Make an apples-to-apples comparison by getting everything in writing: all services being offered for the quoted fees. Most towns have multiple credit counseling agencies and debt consolidators available, and bigger cities have a staggering array of options. If you can, speak with friends, coworkers, or relatives who have utilized a similar service to compare prices. The last thing you want to do is dig yourself deeper in debt by paying inflated fees to an ineffectual company!

 

Editor’s note: Jerry touches on some great points. When I was wallowing in credit card debt a reputable counselor helped me dig my way out. If you’re in this situation I would encourage you to follow the steps Jerry recommends.

Author Jerry Coffey is a recovering debtaholic, having spent many years in a debt-riddled gray area somewhere between broke and desperately broke before climbing out of debt through smart budgeting and frugal-living. Now he blogs over at Repaid.org, and you can read his personal story of becoming debt-free here.

Similar Posts:

0saves
If you enjoyed this post, please consider leaving a comment or subscribing to the RSS feed to have future articles delivered to your feed reader.

About the author:

I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. You can connect via Twitter / Facebook.

39 comments on “Finding Qualified Help for Eliminating Debt: 5 Steps

  1. Is there no equivalent to the Citizens Advice Bureau in the US then?
    We also have many debt management companies in the UK, but I wouldn;t recommend any of them, purely because bodies like the CAB and CCCA will do the same for you, for free.
    Having worked for one, it also seems that getting you out of debt isn’t really that good for business. Lowering payments as much as possible so it takes years longer to pay off seems to be the aim of most of them.
    Matt recently posted..10 Tips for Buying a New Mobile PhoneMy Profile

    • Pauline,
      Debt management is not as bad for your credit as debt settlement, for instance. It largely depends on how creditors decide to handle things when your credit counselor contacts them. In many cases, they will report your account as current, and only add a notation that you’re enrolled in credit counseling – a notation which typically disappears after you’ve paid it off. Unfortunately, other creditors won’t give you a decreased interest rate unless they charge-off your account. Obviously that will hurt your score. But enrollment in a DMP in and of itself does not decrease your credit score, as far as I know.
      Taylor @ Repaid.org recently posted..Money Can Buy You Happiness?My Profile

      • Thanks for providing that distinction Taylor! Speaking personally, I was on a DMP and they kept the accounts current plus got me the lower rates. They simply acted as a middle man for me and acted on my behalf. Nothing was put on my credit report that they were doing this and did not affect it in anyway. However, that is not to say that my credit was stellar at that point anyway. ;)

  2. You do have to be so careful with debt management companies. They often do what’s right for them and not for the client. When I worked as a mortgage advisor I came accross quite a few people who had signed up to something that they thought was going to improve their situation and it actually made it a lot worse. Matt’s right, over here in the UK we have some great free organisations available to help.
    Money Bulldog recently posted..Should People On Benefits Have To Work For Their Money?My Profile

  3. Great points! “But all too often you’re the one being handled by your debt, not the other way around” – this is so true. It’s unfortunately that there are so many debt scammers around hurting those who are already hurting and seeking help. You absolutely must do your due diligence. Good help is out there – but you have to shop around to find the right service for your needs.
    Shannon Ryan @ The Heavy Purse recently posted..Valentine’s Day Love BoxMy Profile

  4. Good tips Jerry. I think that when people are in debt, they are usually desperate. This is how they often fall prey to unscrupulous scammers that will be more than happy to take the only money they have and screw them over. You should always question everything. If it is too good to be true, then it is. Protect yourself and follow your gut.
    Grayson @ Debt RoundUp recently posted..Adding Gold and Silver to My PortfolioMy Profile

  5. Scammers who feed off of people in debt are the reason that I want to create a non-profit to help people out of debt. The one major flaw with my plan is that I would feel bad taking money from people already on the edge of financial disaster.
    It’s really sad that so many people are willing to take advantage of people already in a bad spot.
    Justin@TheFrugalPath recently posted..Can you use Coupons at the Dollar Tree? Yes!My Profile

    • Justin, I totally understand. I think that if you’re providing a truly helpful service, then there is no issue charging a reasonable fee. You can’t do everything for free! But I hear you, people are already in dire straits, and you don’t want to push them closer to the edge of financial ruin. I think the issue is services that take people’s money, and then either do nothing or make things worse.
      Taylor @ Repaid.org recently posted..What To Do With Your Tax ReturnMy Profile

  6. When it comes to getting out of debt it defiantly pays to look around and research what you are getting it. Debt negotiation agencies will charge around 17% of the total amount of debt that you give them which can be quite costly. My suggestion is the ones that you mentioned or one of the great DIY options like Dave Ramsey Baby Step Plan.
    Chis @ Stumble Forward recently posted..10 New Home Upgrades To Consider Before You BuildMy Profile

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

CommentLuv badge