Throughout this website you will find links to some of the best debt consolidation companies.
You will also be able to access various reports and articles the will help you understand things such as:
Is getting debt consolidation loan a good thing?
Where to get top consolidation loans
Credit Card debt and how to reduce it
Avoiding bankruptcy
Obtaining your credit report and how to go about credit repair
Credit counselors and counseling how do you find them?
Is there a way you can lower your bills and clean up bad credit?
Debt settlement can be a daunting task. How do you go about it?
Facts You Should Know BEFORE Considering
Credit Counseling or Debt Consolidation
By Terry Price
(C) Copyright Terry Price
All Rights Reserved
There is one topic which every
time I write about it seems to generate
some hate mail while at the same time
spawning a flurry of wonderful praise
from consumers. Of course, the hate
mail is always from a few people that
happen to own these "certain types" of
businesses I discussed and those
businesses of course are Credit
Counseling or Debt Consolidation
companies; of which many "claim" to be
non-profit organizations.
You'd almost have to be an ostrich
with your head stuck in the sand to not
see or hear at least one advertisement
a day from a Credit Counseling or Debt
Consolidation Company. However, you
can expect this to change and change
soon. Since this is a topic which
tends to "stir up" the owners of these
businesses, I am going to take a
different approach by NOT sharing my
opinion, but rather, the opinion of
others. I will start with the news
media and the Internal Revenue Service:
"(NPR News, May 15, 2006). The
Internal Revenue Service is revoking
the tax exempt status of some of the
largest credit counseling agencies in
the country. An IRS investigation
disclosed that the firms solicited
business from people seriously in debt
and that they didn't provide counseling
or consumer education, as required.
Prodded in part by a congressional
oversight committee and consumer
advocates, the IRS began investigating
dozens of credit counseling agencies --
most holding non-profit status -- two
years ago. IRS Commissioner Mark
Everson says the companies "poisoned an
entire sector of the charitable
community."
Everson says in many instances,
companies were organized merely to
funnel business to loosely affiliated
for-profit companies. Many of the firms
spend millions of dollars on
commercials that urge anyone with debt
to call them to solve their financial
woes. And because tax-exempt
organizations are not bound by the
federal do-not call list, the firms
were able to randomly call consumers,
pitching their services under the guise
of a non-profit counseling service.
The IRS investigations are also
likely to affect consumers, thanks to a
new bankruptcy law that requires
consumers considering bankruptcy to get
counseling before they are allowed to
file. The IRS wants to ensure that only
legitimate non-profit agencies are
doing the counseling. In addition to
the actions announced Monday, the IRS
is sending more than 700 compliance
letters to the rest of the credit
counseling industry (END)."
Since almost all Credit Counseling
and Debt Consolidation companies claim
a non-profit status, I feel most
consumers are easily sucked in with
their skepticism and defenses at bay.
After all, when most of us hear the
word "non-profit" the first thing we
usually think of is a church or
homeless shelter.
From the NPR article and the
actions of the IRS, I think it's fair
to assume that many of these "non-
profit" organizations have been
operating under a scenario similar to
that of a wolf guarding a hen house.
However, this doesn't mean all credit
counseling and debt consolidation
companies are bad but... you do need to
know the truth about how they operate
and their limitations.
The first thing you want to
understand is these companies are ALL
more interested in making money off you
than they are in preserving your credit
rating. The bottom line with either
credit counseling or debt consolidation
is that it absolutely ruins your
credit. I can just hear the companies
arguing this with a consumer right now,
telling them nonsense like "It helps
your credit since it tells creditors
that you're working on your situation
and not just running away from it."
Listen... if one these places tells you
that than watch out. Why? Because
they will lie to you about other things
as well!
One of the first actions these
programs usually requires you to do is
for you to CLOSE all your revolving
credit accounts. You then make
payments to the organization and they
take care of everything for you. What
this says to all your creditors (as
well as anyone considering giving you
credit) is that you are so out of
control with your finances that you
can't even manage paying everyone back
on your own. Therefore, you're hiring
someone else to do it for you!
99% of the time these companies
will claim they can negotiate with your
creditors and get interest rates
reduced thereby saving you money.
While this is true, what's also true is
you can easily negotiate these same
rates as well as they can by just
calling your creditors yourself. You'd
be amazed at how many of your creditors
would love to hear from you (especially
when the chips are down!). Not too
mention, any money the counseling
company was to save you would more than
likely be sucked back up by their
monthly fees (usually around $500 to
$1,000 per year).
This brings us into a whole other
dynamic of their business model.
Because these companies always make
their money off of monthly fees paid by
the consumer, the longer they can keep
those monthly fees coming in the more
profitable their business will be.
It's for this reason that most
consumers who sign up with these
companies usually find themselves on
payment plans with the lowest monthly
payment possible (which turns out to
also be the LONGEST payment plan as
well). Not surprising is it?
Am I against Credit Counseling and
Debt Consolidation companies?
Absolutely not. After all, there are
millions of people in America who will
never be able to manage their finances.
Credit to them is a destructive
addiction much like alcohol or drugs
and they will never be able to control
it. Instead, it will always control
them. We've all seen these people.
Every time they are extended credit
shortly thereafter they are in
financial trouble (usually blaming it
on some external factor). For these
people I think these credit and debt
counseling programs can be a good thing
(as a ruined credit report is not a
hindrance to them but actually an
asset). It keeps them out of future
financial trouble by forcing them to
live their lives on a "cash and carry"
basis; which is ultimately conducive to
a better standard of living down the
road.
On the other hand. If you're good
with your finances and have control
with credit but went through some type
of hardship beyond your control in the
past (i.e. divorce, job loss etc); then
the services of these companies will
never be for you. You will do far
better and preserve your credit rating
by taking matters into your own hands.
Reason being is that you understand
your credit rating is a powerful tool
that can help you move ahead faster,
help others and help yourself as well
as create the life you want. It all
comes down to self management. We all
know that those who cannot manage
themselves will ultimately be managed
by others. Credit is no different.
When you learn to manage it well, you
are the master and it is the servant.
If you care about your credit and
want to benefit from it in the future,
then you will never rely on a credit or
debt counseling service to help you get
out of any trouble you find yourself
in. Instead, you'll look inward and
get yourself out while preserving your
credit rating the best you can. Credit
and debt counseling is for people who
are "ok" with throwing their credit
rating in the trash so they can have
"someone else" manage their payments
for them (since they are unable to
manage them themselves). And again, as
far as negotiating interest rates, you
can do just as good as them or better.
If you don't believe me just call any
of your creditors and straight out tell
them your situation. You will quickly
find you don't need to be afraid of
them. They just want to get paid like
the rest of us.
