Get Rid of Credit Card Debt With Credit Counseling
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Credit card debt has been an ongoing problem ever since the credit card was created in 1950. People were going into debt at an astounding rate. Many are trapped into unbearable credit card debt that they couldn’t possibly pay it all back.
A debt free life is a dream to many debtors. There are many options available today for you to get rid of your credit card debt, but the keys to success are your patient and consistency to carry out the plan in your selected option. This article will discuss on one of credit card debt solutions called Credit Counseling.
What is Credit Counseling?
Credit counseling was introduced by federal government to provide counseling services and help you to find out what steps you could take in order to relieve from your debt. The credit counseling companies will assist you to set up a payback plan that will help you to get out of debt within a certain years.
The credit counseling agencies are designed to be non-profit, which means majority of your payments must be earmarked for debt payment. However, credit counseling agencies can legally collect a small fee for administrative costs, but most of the counseling services’ fees are paid by the lenders themselves, which send back to the services a portion of the payments received.
How Does Credit Counseling Work?
Typically, counseling services help you to negotiate lower payments with credit-card companies. Before a credit counselor proposes to you a repayment plan, he normally will do some assessment on your current financial status and get detail information on your debt condition.
Your counselor can then map out different ways to debt consolidation, potentially pushing all or most of your outstanding balances onto one or two low interest cards or even taking out a debt consolidation loan to get rid of some or all of your credit card debt.
When Do You Need Credit Counseling?
If you are able to pay your bills and are current on all your accounts, you almost certainly don’t need credit counseling. If your interest rates are too high, you usually can negotiate a lower rate with your credit-card companies just by asking or threatening to move your account elsewhere.
You will need credit counseling if:
- You can’t pay the minimums on your credit cards.
- You’re consistently late paying one or more of your regular bills.
- You’re being hounded by creditors and collection agencies.
- Your efforts to work out reasonable repayment plans with your creditors have failed.
If you are too serious in dept, a credit counseling service may not able to successfully help to negotiate with credit card companies for a payment that will give you breathing room or get you out of debt. If that is true, bankruptcy may be the best of bad options.
In Summary
If you have unbearable credit card debt and the harassing creditor phone calls have made you in deeply stress which causes you can’t think of an idea or a way to settle your credit card debt, a credit counseling service should be able to help you. By going through credit counseling process, you will have a better picture on the options available to you to get rid of your debt; enroll to propose payback plan that best suit you financial capability.
Cornie Herring
http://www.articlesbase.com/credit-articles/get-rid-of-credit-card-debt-with-credit-counseling-88739.html
How badly will using debt counseling/credit card counseling hurt my credit?
I am thinking about consolidating a lot of unsecured debt using a debt/credit card counseling service. How will use of that sort of service affect my credit rating long-term?
Debt counseling will hurt your credit within 3 months. It can drop your credit score by 50 points. The best way to consolidate debts is through a second mortgage or a home equity line of credit.
Self debt management is the best way, but if it doesn’t work, you can seek counseling help. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But be aware that, just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which may be hidden, or urge consumers to make “voluntary” contributions that can cause more debt.
Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.
But be careful with some credit counseling scams on the internet.
References :
http://www.debt-consolidation-us.com/Credit-Counseling-and-Debt-Management-Plans.htm
Jim,
While using a credit/debt counseling service seems like a good deal on the surface, in reality it isn’t. It WILL hurt your credit and depending on the creditors you have, you may or may not get any breaks on your interest rate. And even non-profit organizations have to make their money somehow so there will be some sort of fee you would have to pay.
Your best bet is to do things on your own. You first need to set up a realistic budget. Again, you CAN do this on your own, or you could meet with someone and have them help you if it is offered as a free service. A word of warning … not all counselors or advisers are created equal. If they don’t ask you a LOT of questions about your expenses and if they don’t pick up on the little hints you drop that indicate something out of the norm, the budget they create for you will not be realistic.
For example, when I was a counselor, the budget forms we filled out for our clients were basic and of course had the "other" section that was supposed to cover items not on the form. So if I was counseling a woman and I noticed she obviously got her nails done on a regular basis, it was up to me as a counselor to ask her how much she spent on her nails. Most people don’t think about "little" things like that and since the form didn’t specifically ask about nails, most clients didn’t think to mention it and many counselors didn’t bother to ask. While one thing missed when setting up a budget might not throw it out of whack, if two or three or more items aren’t caught, the budget isn’t realistic and the payment plan they set up is doomed to fail.
YOU, better than anyone else, know what your true expenses are. The best way to really track this is tedious … but well worth the effort. For 30 days, write down everything (and I mean everything!) you spend money on … regardless of how large or small. (If you’re married or have a partner where expenses are combined, be sure you both do this!) That, combined with your regular bills, your periodic bills, and your debt payments will be what you base your budget on.
If you’re like most people, once you set up a budget you will realize you are "short" or at least confirm that there is "nothing left to pay the bills". On the surface that is often true … but there are always places you can cut.
You just need to get serious about it and analyze every area of your life to see where you can make small changes that will add up. I created the Dollar A Day System just for people like you … people who want to get out of debt but maybe need a little DIY guidance on making it work.
References :
http://DollarADaySystem.com/
Please do not consolidate. It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. Or they negotiate your debt down after telling you not to pay for awhile adding another hit to your credit score. There is a better way.
A. Have a garage sale and sell anything that you no longer need or want.
B.Get a temporary part time job, if you have one, get another.
Here is a plan that can help you. If you work the plan, the plan will work for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don’t even have to worry about it. You must cut your spending and live on less than you make.
2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.
3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:
To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment
Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment
Debt #1: paid off
Debt #2: paid off
Debt #3:Minimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.
That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.
4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.
5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.
5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.
5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.
You can do it and it isn’t as hard as you think. Just follow the plan
References :
Debt consolidation should not adversely impact your credit unless you are looking to have relief granted (balances reduced/eliminated). But even that is better than getting into a chronic delinquency status.
http://www.low-cost-loan-secrets.com/cheap-credit-cards
References :