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Do You Need a Debt Counselor?

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debt counselorMany of us like to think that we can handle our debt problems on our own. And, in many cases, it is possible for you to come up with a debt reduction plan by yourself, and execute it. However, some find themselves overwhelmed by their debt, and unsure of what to do next. It can seem like a hopeless case, and that, in turn, can worsen the debt spiral.

If you are finding it difficult to put together a debt pay down plan on your own, it might be in your best interest to look for a debt counselor. A debt counselor (also called a credit counselor) will look at your current financial situation, take a look at your debts, and then help you come up with a plan to pay off your debt in a way that is manageable. You will have fees to pay, but for some, just having that outside help can be just the thing.

Not all debt and credit counselors are the same, though. You need to do your homework before agreeing to work with one.

Choosing a Debt Counselor

One of the problems with the credit counseling industry right now is that there are a number of high priced services, along with outright scams that promise fast credit repair. Before you sign anything, or start working with anyone, you want to make sure that you are working with a legitimate and approved credit counselor. The U.S. Department of Justice has a list of approved credit counseling agencies; this can be a good place to start. You can also look for accreditation by the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies. Check with the Better Business Bureau as well, looking for serious complaints.

You should also find out about fees for services up front. Debt counselors have to provide you with a fee schedule, and a description of what they can do for you. Some credit counselors will only help you come up with a plan for paying down your debt, and leave you to do it on your own. Others will actually help you consolidate your debt and make payments for you. Make sure you understand what is offered, and how it fits your needs before making a decision.

Warning Signs of a Scam

You should be on the lookout for signs that your debt counselor is running a scam. The unscrupulous prey on the desperate and confused. Here’s how you can spot a potential credit repair or debt counseling scam:

  • You are asked to send money via wire transfer, or send a contract and payment via private courier. Scammers like to avoid the Postal Service so that they can’t be tracked — or prosecuted for mail fraud.
  • You are promised that you can repair your credit quickly, using “secret” techniques. The truth is that these companies can’t do something for you, legally, that you can’t do on your own for free.
  • Representative is vague about services and fee schedules.
  • Debt counselor doesn’t have a physical office that you can visit to meet with someone.

If you are unsure of where to start, a certified and accredited debt counselor can help. But you have to proceed with caution in order to avoid being scammed.

(Photo: Alan Cleaver)

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One Response to “Do You Need a Debt Counselor?”

  1. A long time ago when I was working in the finance industry, when our clients were beginning to have serious money problems, we used to direct them to Consumer Credit Counseling Services (CCCS). I did some research and it looks like they have changed their name to CredAbility (credability.org) They are a non-profit and they have been around since 1964.

    You are absolutely right that there are a bunch of scams out there. I would generally tell someone to check them out and see if there is a non-profit that they could use.


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