Everywhere in the world today, people are becoming submerged in debt. Everywhere you look, it is possible to purchase today and pay tomorrow, consumers are steadily falling into this trap everyday, and before they know it, they are so far in debt they are unsure how to get out. This is where debt counseling comes in; however you need to be made aware of debt counseling frauds. Some are only in place to take your money.
Legitimate debt counseling companies do not claim to be not-for-profit if they are not. There have been cases where a company has claimed this and ended up swindling their client’s money. There are ways to protect yourself; you should check a debt counseling company’s reputation thoroughly before investing your time and effort into them.
Never conduct business with a company that requires any upfront fees or asks you for voluntary contributions. This is a red flag, legitimate debt counseling companies advise you on money management, budget development, debt and educational material and occasionally workshops.
Essentially, it is none of their business regarding the details of your situation or requires you to be approved. They should discuss your financial situation and help you in developing a plan to eliminate the problems.
You can also check your local government agency or better business bureau, to ensure that they are indeed legitimate and no complaints have been filed against them.
The other things that will tell you rather or not a debt counseling service is legitimate include the following things. If they promise lowered payments, leave, only interest rates can be lowered not payments. If they ask you for your account numbers prior to giving you a quote, this is not necessary at all. If they group the quotes together instead of giving you a breakdown of how each creditor will be handled, this will leave you with no idea of how long it will take to pay off each account.
There are also questions you should always ask when choosing a debt counseling service. These questions should include charges for educational material, a disclosure in writing of fees that are charged, if they are properly licensed to do business in your area, what will happen if you cannot afford their fees, what type of services do they offer and if the counselors are certified and who certified them. This is your money and your financial well-being, do not leave any stone unturned.
There is a new bankruptcy law that makes filing bankruptcy harder for everyone. To file a chapter 7 will be nearly impossible if you are currently employed. They have formed a test that you will have to pay showing that your income is less than the median income for your area. Along with these new laws, it has become required to obtain debt-counseling services when filing bankruptcy.
Choose the debt counseling company very carefully and ensure they are legitimate. You do not want to cause more harm or damage to your credit, so choose reputable companies wisely.
Tags: Account Numbers, Better Business Bureau, Budget Development, Consumers, Counseling Service, Creditor, Debt Counseling, Educational Material, Financial Situation, Frauds, Interest Rates, Legitimate Debt, Local Government Agency, Management Budget, Money Management, Red Flag, Reputation, Upfront Fees, Voluntary Contributions, World Today
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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