When you apply for many debt management companies, you will receive free quotes and free advice. Among the tips is not to apply for new, unnecessary credit. Every time you sign and return a new credit offering, an inquiry is generated and your credit score reduced. Furthermore, in order to avoid falling into more debt and maintaining a decent credit rating, keep all balances at a level that is 35% to 40% of the maximum credit limit.
Are you aware that...
- A debt management program can help you save at least 33% and as much as 57% of your total unsecured debts?
- With the right plan, you will be able to consolidate your debts into one easy monthly payment?
- You can say goodbye to the collection agencies and creditors for good, because the managers of your DMP will handle all negotiations, communication and payments for you?
- Thanks to a DMP, you can escape the perils of debt and live debt free in just 3 to 5 years, when your counterparts may take 10 to 20 years?
Since the typical U.S. household owns 10 cards and possesses over $5 thousand in debt, the most popular program is standard credit card debt management. Another recent popular program is Christian debt management which keeps its clients' best interest in mind, both concerning financial and personal matters. Non-profit debt management is an option for business owners in need of relief.
Be wary of credit counseling organizations that:
- Charge high up-front or monthly fees for enrolling in credit counseling or a debt management program
- Pressure you to make "voluntary contributions," another name for fees
- Won't send you free information about the services they provide without requiring you to provide personal financial information, such as credit card account numbers and balances
- Try to enroll you in a DMP without spending time reviewing your financial situation
- Offer to enroll you in a debt management program without teaching you budgeting and money management skills
- Demand that you make payments into a debt management program before your creditors have accepted you into the program
Reputable debt management programs include members of the Association of Independent Consumer Credit Counseling Agencies (AICCCA) and the National Foundation of Credit Counseling (NFCC), the oldest network of nonprofit counseling agencies.
The AICCA caps enrollment fees for debt management plans at $75. Monthly service fees are capped at $50. Many member agencies charge fees well below these caps. Members of the NFCC, whose members are mostly known as Consumer Credit Counseling Services, charge an average enrollment fee of $19 and an average monthly service fee of $12 to clients that enroll in debt management plans.
But some debt management programs aren't on the up and up. Some agencies charge up-front fees as high as 3% of a consumer's total debt. Other agencies pocket the first month of credit payments for themselves. So right off the bat, you're a month behind. The result? Your credit accounts get slammed with late fees and penalty interest rates.
By Greg Hitchcock