Editor's Note: This article is the second in a two-part series containing consumer tips regarding credit counseling services. Please click here to read the first article in this series.
4. Know About Their Fees
Reputable credit counseling agencies generally offer budget services for free, but they will charge fees for their debt management plans (DMPs). The key is to find an agency that has reasonable fees. Linda Tucker, Director of Education and Marketing for Consumer Credit Counseling Service in North Little Rock, Arkansas, says a monthly rate of $15-$25 is a reasonable amount to pay and $50 is on the high end. Sometimes fees depend on the market, so if you live in a state like California or New York you may end up paying on the higher end of the scale. If you can’t afford their fee even if it is reasonable, ask the agency what type of help they can still offer— most good agencies won’t turn you away.
Know About Their Counselors
Find out what type of training the agency’s counselors receive. Ideally, they should be both trained and accredited by an outside source completely unaffiliated with the agency.
6. Know How Employees are Paid
Don't be too embarrassed to ask if their employees are paid a salary or on commission. If an employee is paid on commission, then they are more likely to pressure you into a DMP because they are probably watching out for their pocket book, not yours. If this is the case, look elsewhere!
7. Know About Their Funding
Non-profit agencies have other sources of funding than just the fees paid by their clients. Ask from what other sources they receive funding and who regulates and audits their operations. Are they certified by the International Standard of Operations (ISO compliant)?
8. Know About Their DMP
If, after careful analysis of your finances, you and your credit counselor decide a DMP is the best next step, you will need to know what to look for in a good program. Look for a program that pays your creditors before the due date. If the agency makes late payments or misses payments, it will only hurt your credit history.
Also make sure you will continue receiving monthly statements from either your creditors or the agency. Since it’s your credit history on the line, it’s important to know the interest rate, payments, and balances for each of your creditors.
9. Know How Each Creditor is Involved
Sometimes not all creditors decide to participate in the DMP. It’s important to know which ones don’t sign up so you can continue making payments to them on your own.
During the process of enrolling into the program it’s also important to keep paying your creditors so you are not charged late fees and penalties. Contact each creditor to confirm they have accepted the terms of the proposed plan or to verify that upfront payments are required. Once everything is confirmed, it’s okay to start sending your payment directly to the credit counseling agency.
Know the Difference Between a DMP and Debt Settlement
One final note— a DMP is not the same thing as debt settlement or debt negotiation, which is very controversial and much riskier. Debt settlement/negotiation focuses on making a deal with creditors to forgive a portion of the debt.
Gerri Detweiler, founder of DebtConsolidationRx.com and author of The Ultimate Credit Handbook, suggests debt settlement is most appropriate for those who are not able to make the payments of a DMP and who either can’t or won’t file for bankruptcy. But not all experts agree on the value of debt settlement, so if you do choose it as an option do your research and proceed with caution.
We sincerely hope that these ten tips will help you to decide if a credit counseling service is right for you and, if so, to help you find a good counseling agency that meets your specific needs. There are many less than desirable services out there, so a little bit of research on the front end will be time well spent. Good luck!
Page 1 | 2
Want more info. related to this topic? Then please see our recent article entitled How to Get out of Credit Card Debt Using Self-Help Techniques.
Advertisement: Consolidated Credit Counseling Services, Inc., a nationally recognized non-profit organization, offers a free debt analysis that only takes a few minutes to complete.
We welcome your comments about credit card debt in our popular credit forum!