It seems the big talk around town these days is how to save more and get out of debt. Personally, I love that people are paying closer attention to their finances. People who do so and work to manage money better are in a better position to give to greater purposes. And that’s an important part of achieving true financial freedom!
Many people in a lot of debt are obviously seeking help. The first step is to fix the problem at home. In other words you have to fix you before you can fix the debt. This requires a committment to stop spending excessively, if credit cards are the problem. Next, a budget needs to be created and spending brought in order. This will certainly require sacrifice to reduce expenses, but may also require some sacrifice to generate extra income through a part-time job.
If you’ve taken these steps and still can’t seem to make forward progress, one option to consider is seeking the assistance of a debt counselor. Smart Money recently provided some good tips when choosing a debt counselor:
- Look for a nonprofit firm. You’ve spent too much already; why pay more now? Nonprofits get most of their funding from creditors, not you.
- Privacy isn’t usually an issue, but it’s wise to check what the agency’s policy is.
- Check the enrollment and monthly fees.
- Find out up front exactly what services you’ll receive, such as counseling, a debt-repayment plan and budgeting advice.
- Have them put it all in writing and send you the information before you proceed.
- Ask if the organization belongs to any professional groups, such as the NFCC or the Better Business Bureau.
- Have them explain how they’re audited and if your funds are protected.
Overall, I think these are solid tips. I particularly like the idea of looking for a nonprofit firm. Costs are typically what you have to watch out for as many companies out there are more concerned about getting your money versus getting you out of debt. So, definitely chck the enrollment and fees.
Checking the enrollment fees and monthly fees is something you’ll want to keep an eye on. While these fees have been more regulated some companies have charged ridiculous amounts to people who are obviously just trying to get their heads above water.
According to the Association of Independent Consumer Credit Counseling Agencies (AICCCA), many ask for only a nominal enrollment and monthly fee. In the past, a few shady agencies were known to charge the full amount of your monthly debt payment, plus an additional 10% each month, according to the AICCCA. Such excessive charges have been largely wiped out by IRS regulations and updated state laws.
Anytime you’re going to enter into a financial agreement with someone make sure you completely understand what it is they’re going to provide you. Putting the services in writing and sending it to you is a good idea. There is much less pressure to read through the paperwork than over the phone or in-person. Avoid finalizing any agreements until you can read through everything.
What are your thoughts on finding a credit counselor? Do you think these tips can keep you from making a bad decision if you you’re seeking a credit counselor to help you get out of debt? Have you had any experience with credit counseling (good or bad)?
Are there any national nonprofit debt counselors? That list would be great to have!
Jason @ One Money Design says
Jenna, great question. I don’t have a list, but will tell you Crown Financial Ministries has always spoken highly of Consumer Credit Counseling Service of Atlanta. They recently changed their name to Credability. They are a nonprofit. http://www.credability.org/en/homepage.aspx
Another nonprofit is the National Foundation of Credit Counseling. http://www.nfcc.org/index.cfm
Thanks for the tip Jason!