A few years ago, when my partner and I were still dating, she described to me that she owed about $10,000 in credit card financial obligation ranging from a Speigel card to a House Depot card. About 5 credit cards in all. She had actually simply moved in with me into my townhouse and I used to hold down the fort, economically, so that she could settle those charge card. When a pay cut at work forced her to cut down on those payments and she will default on a number of them, she decided to answer among those TV or radio ads for credit counseling and financial obligation consolidation. You understand the ones, "We can negotiate with your lenders and lower your payments, blah, blah, blah ...". Issue was, she never ever told me that she was considering this. If she had, I would have assisted her to look into these offers with her and we might have selected a trusted one. Rather, she chose one from the radio or TELEVISION (I honestly can't keep in mind the name of the business but I make sure they are still out there) and signed up for their debt management program.
So then she settled all those charge card, right?
Well, not exactly. Firstly, let me explain something about how the debt management programs work. Most credit therapy business will charge a setup charge when you register. The fraudsters will charge a ridiculously high, non-refundable amount. By doing this, when they do not do what they assured, and you opt-out of their program, they get to keep your registration fee. So anyhow, back to my other half's story. So as I was saying, she enrolled with this credit therapy business (even she can't remember the name, and she threw away all the documents so we can't look it up, sorry!) and worked out a regular monthly payment strategy with them, about $250 per month. Once they get her payment every month, they will disperse the cash to the five creditors that she listed when she signed up. So when the very first payment came due, she purchased a money order and mailed it out. Word of recommendations, cash orders is necessary since if you send out a personal check, now "they" have your banking details. Constantly utilize cash orders if you remain in the collection! If creditors or debt collector get hold of your banking information, (bank name, account number, branch) they will take it all in one lump amount, whether you are paying or not! I have actually seen it done to great people that were attempting to get their lives back in order.
So, my wife assumes that whatever is going excellent, why shouldn't she, right? Well, a number of months into the program, my other half gets a phone call from among the creditors, asking why she has not made a payment to them in a number of months. WHAT ??!! That's right, this lender had actually not gotten anything from the credit therapists. Not a single penny. It ends up that this credit counseling business liked to play favorites. And whatever financial institution ranked higher on their pal list, got paid first after the credit therapy agency secured their extra monthly "administrative costs".
So did she ever pay off her charge card?
I more than happy to state that "WE" finally settled her cards. I was so irritated with the method my wife had been treated by these people that were supposed to assist, debt relief company that I actioned in and helped her pay everything off. It took a bit, and some luck (a couple of the lenders used a swelling sum settlement, which we right away got on) however we lastly managed to pay whatever off.
So what's the moral of the story?
Moral of the story, be very careful who you work with! In this day and age, it is extremely easy for some con artist to establish a fancy site or run a radio ad assuring "You can be debt-free in simply two weeks! Blah! Blah! Blah!"
If you are severe about credit therapy since you think that a financial obligation management program might benefit you, be really selective. Ask concerns! How much upfront? Just how much every month? Do they get a portion on a monthly basis? Do they pay every creditor on your list monthly? Do they pay on time?
If you are still unsure, you can constantly consult your regional Bbb to see if any grievances have actually been registered against the company. Or you can try to find a respectable credit counselor at the National Structure For Credit Therapy's site, Their website is likewise available in Spanish. Another terrific resource is the Association of Independent Customer Credit Therapy Agencies, which supplies national accreditation to the credit counseling firms.
I thought I would answer a really common concern about credit counseling agencies here as well, "Will credit therapy impact your credit rating?" Regrettably, I can't say "Yes" or "No". It really depends on the financial institution. Some financial institutions will in fact list you as paying on time (assuming you adhere to the program), while others will report to the credit bureaus that your account remains in "Credit Counseling". When new creditors see the words "Credit Counseling", they will either avoid extending brand-new credit to you, or they will want to gamble on you because they appreciate the reality that you are on your way to getting your monetary affairs in order. Every case is different. I can inform you that NOT paying your debts WILL hurt your credit rating.
The last credit counseling firms your good friend or foe? You decide! Pick carefully and weigh your options, and above all, buyer beware! Like anything else in life, if it sounds too great to be real, it probably is!