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Get the most out of debt management. Help yourself by filling out the form on the right to be contacted by a professional debt counselor.
Articles > Free Credit Counseling are the Superior Choice
Free Credit Counseling are the Superior Choice
The economy has been difficult for Americans for the past several years. Millions have lost their jobs and many more have had to take pay cuts. People who previously were very responsible with paying their bills on time are now skipping some credit card payments in order to meet the minimum payment on others. Late fees and mounting interest charges make the situation worse. There is a solution for massive credit card debt. Enroll in a debt management program.
Just as all things in life are not equal, neither are debt management programs. The better ones offer free credit counseling to help the client recover financially.
Enrollment in this type of program has several benefits.
1. A professional agency will negotiate with the creditors. This increases the likelihood that high interest rates get reduced, late fees stop, and sometimes a payoff deal that includes a significant reduction in the amount owed.
2. The clients job is more secure when no one at work knows about credit card problems. Some employers fire excellent workers, as they believe someone who cannot manage his personal finances might steal from the company. Collection agencies stop calling at work once a debt management program starts making monthly payments.
3. A debt management program works within the clients budget when negotiating with creditors. Of course, if monthly income is very low, then the client might need a second job to meet minimum program requirements. But usually, the newly lowered credit card payments allow for a small degree of flexibility in the budget.
4. Credit counseling helps debtors to see where they made a wrong turn with their credit cards. Credit counselors show clients how to design a budget that actually works.
5. Free credit counseling teaches this skill without taking money from the clients strained budget. He or she gets the benefit of a financial professional as part of the debt management program.
So exactly how do debt management programs work? The process begins with an assessment of the clients current financial situation. Gather necessary documents before the first meeting, including recent pay stubs, living expenses including the housing payment and utilities, credit card statements and any other money paid every month, such as child support or back taxes. The debt management program will provide a complete list.
The credit counselor reviews the financial records to ascertain how much money the client can afford to pay on the credit cards every month. Most credit card companies require at least one-half of the minimum amounts, but some creditors may not be willing to negotiate that low.
After the free credit counseling session, the agency will contact all creditors to work out a payment arrangement. Creditors know that the alternative might be bankruptcy, where they take the chance of not receiving any money, and this encourages them to agree to participate in the debt management program. After this process is complete, the client will know the exact amount to pay into the debt management program every month.
It can take several years to repay all creditors, depending on the amount owed. Four or five years are not an unusual length of time. The client lives on a cash budget during this period, as the debt management program may prohibit incurring new debt.
While the client is expected to live a thrifty lifestyle, he or she should not think of this as a sentence to a lifetime of boredom. There are hundreds of recreational activities that cost nothing or very little. The client can live a full life and have the dignity of someone who accepts responsibility for his debts.
