Part of the reason we’re in such a bad economic recession is the mounting debt that most of the population carries. So there’s a good chance that you, yourself are also in debt to some degree. One of the biggest problems that comes with that debt is trying to find a way out, as debt is a constant battle that you could end up fighting for most of your life. In fact most people don’t necessarily even know where to turn when faced with mounting bills, as wading deep into the waters of debt can feel insurmountable, to the point where you fear you’ll never be able to overcome the seemingly never ending pile up of interest rates and penalty fees.
But there are plenty of things you can do, such as debt consolidation to gain a little breathing room and make some headway on that mounting debt. The first and most tried and true strategy to put into action, is consolidating any of your credit debt that may be spread out over multiple cards onto one card with the lowest interest rate available. This way you stop your cards with higher interest rates from building up more cash that you’ll have to pay back later, and you have the opportunity to really eat into that debt.
Another quick fix is a home equity loan, if you own your own house. This is a quick loan you can take out from your bank in which the collateral is your house. So you’ll be able to get a good amount of money quickly, and usually home equity loans don’t have to be paid back as quickly as credit card bills, and the interest rates tend to be lower. Not to mention the fact that there are all manner of tax deductions available for interest built up from home equity loans.
If those fail, there’s always a credit counseling agency. They will work with the agency’s collecting your debts to consolidate the payments and reduce your interest rate to the lowest possible amount, making your debt free life reclamation much, much easier.
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The worsening economic crisis is making a lot of people desperate. They are turning to debt counseling, credit counseling, and debt consolidation services to get out of their financial problem. Currently, credit counseling has become a $7 billion business industry but not all service providers are reliable. Going for credit counseling can be an effective way to solve debt problems. At the same time, it is also important to realize that there are risks involved when selecting an agency. Fly-by-night entities can disappear suddenly with your money and worsen your already bad credit rating.
Understanding the Industry
About a decade ago, the market was dominated by one major player, the National Foundation of Credit Counseling. This organization has nonprofit partners called the Consumer Credit Counseling Services. They basically negotiated for lower rates on behalf of their clients. But a lot of competition spawned up since then. Ever since consumer debts rose in the 1990’s, this service has become a huge industry.
A lot of credit counseling agencies have slick advertising and great promises. Some do an excellent job in negotiating their client’s rates but there are also some that simply get your money and do nothing. It is important to be wary about these types of agencies. There are also “debt settlement” specialists that promise to help you get rid of your debts as long as you pay several thousand dollars in upfront fee. If you encounter this type of agencies, it would be in your best interest to stay away from them.
Here are some important red flags you should watch out for:
Requires payment of large upfront frees – legitimate companies typically charge $10 for the set-up fee. If the credit counseling agency you go to requires a lot more, then ask for the specific services they provide. Unless you will get extensive money coaching that will take up much of the coach’s time, you may be getting yourself into a scam.
Delayed payments – some entities pocket your first payment to the creditor as their fee. If any missing or delayed payments occur, investigate immediately. Missing or delayed payments will damage your credit rating; the agency will be doing more harm than good if this happens.
No accreditation – don’t go to a credit counseling agency that’s not affiliated with the Association of Independent Consumer Credit Counseling Agencies or similar organizations. It simply heightens your risks.
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