While many credit counseling institutions are, in fact, legitimately offering help, there aren't always genuine intentions behind those convincing ads appealing to help you "get out of debt now!" The credit counseling industry represents a hotbed of activity from scammers. The truth of the matter is, there are nearly as many companies and individuals offering debt relief help as there are individuals trying to cope with spiraling debt.
A legitimate credit counselor may perform some or all of the following tasks: help you prioritize your bills, contact lending institutions, create a reasonable budget for your household, and help you develop the money management skills that you need to get out, and stay out, of debt.
There are many companies these days that claim they can provide consumers with free bankruptcy advice and other services geared toward miraculously wiping away their debt. Such claims are very tempting to those of us who are in dire financial straits- many indebted Americans, particularly those with full households to support, are sometimes in a fury to blindly "sign on the dotted line" and take these supposed credit counselors up on whatever immediate bailout they are offering.
Before you sign on with a credit counselor, make sure they explain to you how their services work, especially when they are charging you a fee. People who claim to be credit counselors, whether they are offering tax debt relief or some other form of debt alleviation, who ask you up front for secure financial information such as account numbers should be a red flag to you if they do so without explaining what they plan to do with that information first.
Here are some things that, in most cases, a real credit counselor won't do:
-Contact the borrower's lending institutions to negotiate a reduction - most companies that claim to provide this service don't really have that power.
-Wipe away your debt completely - avoid any credit counseling company that claims to do this; it is simply too good to be true, and therefore it's not!
Debt can certainly be scary and overwhelming, putting unnecessary strain on relationships and families. It makes people vulnerable to companies preying on their fears in an attempt to make a quick buck without actually rendering the services they advertise.
If a counseling agency requests that you stop making your monthly payments to credit card companies or mortgage lenders, claiming they will make them for you, make sure they are doing just that, rather than just taking your money and creating even more debt in your name. Furthermore, if a credit counselor asks you for anything more than a $50 fee just for signing up with them, they are probably more interested in your money than helping you out of debt. Monthly fees of $30 or more are red flags as well.
Whether you choose to go it alone or solicit the services of a credit counselor, understanding your options and who you can trust will bring you that much closer to eradicating that financial burden.
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