I'm going to quote liberally from Consumer Reports, because I trust what they say on issues like this:
Credit-counseling agencies are often touted as the place to go for advice and to set up a debt-management program. But in the past some disreputable ones have only dug consumers in deeper. A common ploy: taking your money with the promise of paying off bills, then simply pocketing the cash. The Federal Trade Commission has cracked down on some of the bad apples, but you still have to be careful. If an agency says it uses your first month's payment to creditors for its own fee or as a "voluntary contribution," run the other direction.
You can check credentials at The Association of Independent Consumer Credit Counseling Agencies (
www.aiccca.org) and the National Foundation for Credit Counseling (
www.nfcc.org), whose members are supposed to adhere to certain standards. Also ask your state attorney general's office or local Better Business Bureau about complaints. And don't hesitate to shop around, which you can do by phone. In particular, ask about fees, which can vary from agency to agency.
Be aware that even the best credit-counseling agency is limited in what it can do for you. It can't do anything about secured loans, that is, your mortgage or a car loan, nor can it reduce interest on student loans. It can negotiate with credit-card companies, hospitals, department stores, and lawyers, but many aren't yielding as much as they once did. In a study of people who've used credit counseling, Jinhee Kim of the University of Maryland found the best results came about when people sought counseling early on and, most important, stayed with it.
It generally takes about five years to pay off debts with a debt-management plan. Agencies get most of their funds from the creditors they negotiate with, but you may also have to pay fees, often about $75 to start and $50 a month after that.
And this is from their writeup about how to find a good credit counseling firm:
If your total debt payments, excluding mortgage and car, are between 25 and 50 percent of after-tax income, you should consult a counseling agency. But choose the agency carefully.
The personal-finance experts at Consumer Reports and the Consumer Federation of America offer these tips to help you get the right credit counseling:
* Shop around. Get referrals from friends or co-workers. Check with your state Attorney General's office and local Better Business Bureau to find out if there are any blots on an agency's record. Check that your creditors will work with the agency, and consider visiting the agency in person before signing up.
* Find an agency that will offer counseling and education, not just enrollment in a debt-management plan. Ask what the counseling will involve, how much training the counselors have, and what paperwork is needed to make an assessment. The counselor should generally spend up to 90 minutes assessing your finances. Reject any agency that recommends a debt-management plan without a thorough counseling session first.
* Determine the costs. Find out what the agency will charge to set up an account, as well as its monthly fee. As a rule, if the set-up fee exceeds $50 and monthly fees are more than $25, keep looking. Ask if fees are voluntary, and do not pay more than you can afford. Get a quote in writing.
* Read the agreement carefully. It should provide details about the services to be provided, payment terms, total cost, duration, and guarantees.
* Call your creditors regularly to ensure that your debt is being paid off.
divorceinfo.com
Author
