It is not uncommon for people to struggle with debt repayments particularly if they are hit with an unexpected bill or a faced with, an urgent and expensive repair. The extensive advertising that many new entrants to the debt counseling industry rely on to generate customers makes it seem like anyone with a debt problem can be helped to better life quickly and easily. Avoid debt counseling from these slick enterprises unless you understand the full ramifications and costs that you may incur.
There are many other sources of free or inexpensive advice on your financial situation. They can help you with understanding your financial obligations. They can explain how you may be able to restructure your payments, refinance your debt or reduce your expenses to make your situation better.
Counselors Can Charge High Up-Front Fees
A clear sign to avoid debt counseling with a particular service is if the charge a high up-front fee. There are many services that are funded by charities and grants from the State and federal governments. They are either entirely free or have a small co-payment fee generally under a hundred dollars that can be waived for people that are in hardship. In contrast, many high profile commercial services have a percentage of the debt that they charge as a fee. This can lead to fees of thousands of dollars.
Watch For High Maintenance Fees
It is important to avoid debt counseling services that have high maintenance fees for ongoing services or if they are supervising your payment plan payments. A reasonable fee would be around ten dollars a month and perhaps a little more if your situation is complicated and involves a lot of work. Unethical services can charge a percentage or add hundreds of dollars in fees that could have gone to pay off your debt instead.
Creditors May Not Get Paid
If you are using a service to repay the creditors then be sure to have statements sent to you. This allows you to know that payments are made correctly. It is vital to avoid debt counseling services that miss payments, pay late or pay incorrect amounts. This can leave you with extra fees from your creditors and may affect your credit rating adversely.
Using A Counselor May Damage Your Credit
It may seem counter-intuitive but in some cases, a creditor will downgrade your standing when they become aware that you are using a debt service. If you already have a history of late payments and debt problems then in most cases your creditors will be better disposed to work with your credit counselor as they will see that your account will have a better chance of being paid on time in this situation.
Counselors May Delay the Inevitable
It is a sad fact that many people that decide to get credit counseling only do so when the situation is so bad that the only other option is bankruptcy. It is very important that you are aware of the protection of your assets that bankruptcy may offer and do not make a terrible financial situation even worse. Try to avoid debt counseling services that do not value bankruptcy in circumstances where they are the best avenue to repay debt and to protect your assets.