Sometimes, debt problems become so out of control that professional help becomes indispensable. Debt counseling is one of the many professional services made available to individuals who need help in coping with and paying off overwhelming amounts of debt. Many companies, both profit and non-profit alike, offer debt counseling to debt-laden individuals who need a realistic plan that will allow them to pay off their debts within a period that their income allows.
Debt counseling is usually part of a debt settlement program. Companies that specialize in settling debt will often provide a counseling service to their customers. The counseling is essential for developing a debt management plan. Once a debt management plan is drawn up according to the financial circumstance of the debtor, debt counseling companies then negotiate with creditors to allow the debtor to spread payments over a longer time period. This usually results in lower and more manageable monthly outflows.
It should be noted, however, that many opportunistic companies take advantage of the popularity of debt counseling and utilize that fact to rip-off many unsuspecting debtors. Most non-profit companies are helpful in providing this service, but not all who claim to be non-profit are indeed who they claim to be. Be careful with those who offer their services for free; check out some hidden fees and make sure to read through the fine print of the contract.
Here are a few steps to follow to ensure that you are hiring only legitimate debt counseling companies:
1. If they seem too desperate to get your business, they are in it for the big profit haul. Advertising costs money and companies who spend big amounts of money in advertising are bound to recover their expenses with big profits to boot. Be wary of those companies you always see on television and magazines, in your email’s spam folder, or those that solicit by phone.
2. Organizations such as the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA) impose regulation standards on their members; you are more likely to find legitimate companies from the members of these organizations.
3. Check out the Better Business Bureau to find out if the company is involved in disputes concerning their previous clients. If the number of disputes is considerably high, then it’s a red flag that should direct you to move on with your search.
4. Beware of lofty promises. If the debt counseling company claims to be capable of wiping out your debt, they will not be wiping-off anything other than your hard-earned money. Credit card companies allow negotiations for reduced interest rates, longer payment period or payment of principal only but never on eliminating the entire debt.