Do I need to be on a Debt Management Program?
If you are experiencing any one of the situations below, you may need a Debt Management Program
The consultation our referrals provide to you is FREE.
- You are having difficulty making payments on your own
- You can barely afford to make the minimum payments
- You are suffering from high interest rates
- You have been late with one or more payments in the last 3 months
- You are not seeing your balances go down after you make your monthly payment
- You have high balances on your credit cards
- How much will it cost me to be on the Debt Management Program?
If you decide to enroll with the Debt Management Program that we propose, we do charge a minimal start up fee along with a monthly service fee.
These fees vary by the state you reside in.
How do I know if a company is a legitimate Credit Counseling Agency?
When selecting a credit counseling agency, we strongly recommend that you take the following action:
- Make sure all fees are disclosed upfront
- Make sure they are a 501(c)3 Non-Profit Organization
- Make sure they offer Free Financial Education Services
- Make sure that you’re being offering a Debt Management Program and not Debt Settlement or Negotiation.
- Make sure the counselor you speak with is certified.
- Make sure the agency is ISO certified.
What’s the difference between Credit Counseling (Debt Management Program) and Debt Settlement(Debt Negotiation)?
There’s a big difference between the two services. On a Debt Management Program you will pay 100% of your debt back plus interest. Each time you make a payment, your Credit Counseling Agency will disburse those funds to your creditors. You will still receive statements from your creditors showing when your payment posts, your reduced finance charges and your updated balances. With Debt Settlement, you will pay back 40-60% (typically) of what you owe. In order for the creditors to accept this drastic reduction, your accounts need to become delinquent. Therefore, when you make a payment each month to your Debt Settlement Company, the payment is not disbursed to your creditors. Instead, the funds are held in a trust fund until you reach 40-60% of what you owe. Then, the Debt Settlement Company will attempt to make a settlement with your creditor.
How do I know my creditors will be paid on time?
What are the forms of payment Debt Relief Companies accept?
You can usually pay each month by Automatic Debit (Free), Check by phone ($8.00), Money Order (50 cents to $2.00), or Cashier’s Check ($1.00 – $5.00). No personal checks or Cash!
Many companies recommend paying via Automatic Debit because of three main reasons:
- It’s free (no postage or fee from outside company).
- It requires no action each month by you.
- It’s one of the quickest ways to get money to us.
Can I send in more money once I have a better cash flow?
Absolutely, you can always increase your monthly payment. The more you pay, the faster your accounts will be paid off. We do provide an estimated pay off time at the time of the initial consultation which is based on making just the minimum monthly payment. And if you decide to pay more than the minimum, then your time frame will be shortened. Once you are on the program and you want to pay more, just let us know which creditors to send the extra funds to. Be sure to make any additional payments through us as some creditors may drop you from the program if they receive multiple payments directly from you.
Should I pay my bills on my own before I send you my first payment to the creditors?
We always recommend that you pay your bills up until the point the creditors approve you on the program and post your first program payment to your account. Paying your creditors on your own would assure that your accounts will remain in a current status throughout the program after we receive your first payment, when we make arrangements for future payments with your creditors. If you miss due dates for accounts in the meantime, you are risking penalty fees and negative information being reported to the credit bureaus.
Will I still be able to use my credit cards that I put on the program?
No. All accounts placed onto a Debt Management Program will be closed. When you enroll onto our program, we advise you to contact your creditors and close these accounts on your own. The only true way to get out of debt is to stop charging on the accounts. A quote from the book, Rich Dad, Poor Dad explains it best: “More money seldom solves someone’s money problems. Intelligence solves problems. There is a saying a friend of mine says over and over to people in debt. ‘If you find you have dug yourself into a hole… stop digging.’”
Most creditors will allow you to keep one or two accounts of the program for emergency use only.
Will I continue to receive statements from my creditors?
Yes. You will continue to receive statements from your creditors. It is very important that you monitor these statements on a monthly basis. You want to verify that monthly payments are being posted to each of your accounts, your APR is correct, there are no late or over the limit fees and the balance is going down each month. Report any discrepancies to our Customer Service Department.
Why are my payments arriving late with my creditors?
If your payments are arriving late then this means that your due dates were never changed to 15 days after your debit date with us. Please contact your creditor(s) to get your due date switch to 15 days after your debit date with us. In most cases, only the card holder is allowed to change their due date.
Why are my statements showing a past due amount?
If your statements are showing a past due amount then this means a payment was missed prior to coming on the program or while on the program. In some cases, your due date may have never been changed. Some creditors will forgive any past due balances after three consecutive payments on the program. This process is known as “re-aging”. Other creditors do not forgive any past due amounts. Despite showing a past due balance, your account should still receive the benefits of a lower payment, lower interest rates and be exempt from late and over limit fees as long as they receive a payment every 30 days. Should you wish to have the past due amount removed, you can always make up the missed payment by making payment arrangements with us or your creditor.
How will a debt management program affect my credit?
Creditors may place a footnote on each one of your accounts stating that you are using a credit counseling agency for assistance. According to myfico.com this footnote does not factor into your credit score. Once you complete the program by paying off all your debt, this footnote should be removed by your creditors.
Debt Management FAQs
The creditors require that each account placed on Debt Management Program is closed. When an account is closed, it may affect your FICO score. 30% of your FICO score is based on your Debt-to-Credit ratio. Closing down lines of credit can increase your Debt-to-Credit ratio. If you are concerned with your credit score, it is recommended that one and only one account remains off the program. Due to some creditors’ guidelines, the credit limit on the account left off the program must be lower than $5,000.
Since payment history is the most important factor in calculating your credit score (35% of FICO Score), it is recommended to keep accounts current before, during & after enrolling into the debt management program. If you are unable to keep your accounts current during this timeframe, your creditors may report you past due. Most creditors (but not all) will re-age your account after 3 consecutive payments on the program, reporting your account back to a current status. If your account does not get re-aged, it is then recommended to make extra payments while on the program. The primary purpose of a Debt Management Program is to get you out of debt, not to improve your credit rating.
Credit can be defined as the ability to borrow money. For most people with a lot of debt, borrowing more money is the last thing needed. A quote from the book, Rich Dad, Poor Dad explains it best: “More money seldom solves someone’s money problems. Intelligence solves problems. There is a saying a friend of mine says over and over to people in debt. If you find you have dug yourself into a hole… stop digging.