I am considering using a family financial planning company to help me get my credit card debt under control. I understand that they deal with the credit card companies on your behalf, get the intrest rate reduced, so more of the payment will go directly to the balance. I am wondering if anyone else has done the same thing. Is it pretty safe? Any hidden fees? It sounds like it will work better than what i am doing on my own. Any comments about paying off credit cards this way?
My husband and I had looked in to do that. Most credit counceling agencies will not work with you unless you are already behind in payments though. And you have to agree not to use ANY of the cards while you are using the program. If you decide to go ahead with it, my best advice is to find the state consumer credit counseling agency in your area. When I researched the others I had heard about on TV or on line, I found that a great number of them sound really great at the beginning, and then DON'T actually make the payments on time, if at all, in some of the cases,and that would all count against you, not the agency. We found the Colorado Consumer Credit Counseling Agency listed in the phone book and there were no hidden fees with their services and they actually made the payments as scheduled. Your state probably has the same type of agency. The counselor made sure we understood the process and any fees associated with their service up front (for example, the fee for the initial and subsequent counseling sessions). It is a sliding scale of payments per creditor based on how much you owe each creditor. Some were going to be as low as $10 a month, some higher. Some would have no interest, some low interest. The counselor should explain all of that to you. They will give you a break down of how the total payment you would pay them would be distributed to your creditors. Not all of your creditors are required to participate with the program, however. That was one thing that the counselor made clear up front. While they do have agreements with most major creditors, the creditors don't have to participate in the program and could still come after you if you are making less than the required payment. Majority of creditors would just be happy to be getting ANY money though, so I wouldn't think you would have too many issues. We were told by our counselor that if we were to use any of the cards while in the program the agreement is null and void. Not sure how those other programs work, since I found that so many of them were crap we didn't go any further with them. Good luck in your decision.
From what I've heard you can just do it yourself and save a lot of money. Have you called your credit card companies and asked them to lower your rates? My husband does this every so often. We have also transferred balances to a no interest or low interest on balance tranfers card. If you are a member of a credit union they may have resources for debt consolidation too. You might be able to get a loan through your bank or credit union with a lower interest rate to transfer your balances to. the trick is to get rid of your cards after you do it.;)I would research it and see what you can do for free, before paying somebody. I am definitely not an expert, but I know I've heard you can do this yourself and save a lot of money.
Good luck!
I have not used them myself but had a friend that did. You need to be careful. The company didn't send the payments on time at first but my friend had been told to stop making payments to the credit cards and they would take care of it. So her FICO score went down b/c she was never late on a payment and the company was. I think a lot of the companies won't help you unless you have a certain amount of debt, are late on payments and you many times you have to close your accounts. They normally take your debt amount and set up a plan so you have payments over 5 years to pay it off. Have you tried to call the C.C. companies on your own to see if they will lower your interest rate? Tried balance transfers with a low interest rate?
I know there are good companies out there, just do your research and ask lots of questions. It might be the way to go. It never hurts to call and see what they can offer!
I've heard so many bad stories about those places. Maybe you could look into other methods? Like Suze Orman's books or something.
I found this online, and it's only good until tomorrow, so hurry and download it. Oprah's website is offering a free Suze Orman eBook about finances.
http://www.oprah.com/article/oprahshow/20081119_tows_bookdow nload
There are other links to Suze's advice, like how much to save every month, and how to get out of debt faster. check it out!
I have one friend who did this successfully and another who is in the middle of it and having trama after trama. I have personally pulled myself out of major debt three times. My biggest was over $20K. After that, I catch it before it's so out of control. I've read Suze Orman quite a bit and I agree with her theories, but the one who gave me GREAT advice and actually gave me step by step instructions was David Bach whose first book, Smart Women Finish Rich was my financial salvation. It takes a long time and you have to be smart about your finances forever, but it's so worth it. I've also started using YNAB (You Need A Budget) to keep things under control. You can preview it at www.ynab.com
I'd be more than happy to PM about this topic, too.
Best of luck.
As a CPA, in general, I would avoid the consumer credit counseling type things like this. They often result in problems with your credit in the end from what I've heard and the money you spend on them would probably be better spent somewhere else.
I would suggest you begin listening to Dave Ramsey's radio show and reading his books (The Total Money Makeover is an excellent resource). They provide easy to follow straight forward advice that makes sense and helps you get back on track (even if you're not a CPA). :)
Good luck!
Jamie--
I know you have to beware with many of these companies. I have heard great things with the consumer credit counseling of Atlanta, GA. Here is what a website says about them:
About CCCS of Atlanta
Consumer Credit Counseling Service of Atlanta is a nonprofit, community service agency dedicated to empowering people to achieve a lifetime of economic freedom. CCCS Atlanta provides free, confidential budget counseling, community and personal money management education, debt management programs, and comprehensive housing counseling. Contact CCCS Atlanta by phone at 1-888-771-HOPE (4673), or visit the Web site.
I have heard great things about them, particularly.
Also, I have found Dave Ramsey, Mary Hunt(www.debtproofliving.com) and www.crown.org to be great resources to help with budgeting and debt elimination. My hubby and I got married 4.5 years ago, and we had between us $24K in car loans, and $8K in credit card debt. We now have paid those off entirely, have a good emergency savings account going, and have the tools necessary to live within our means. It takes work, but it can be done. Good luck on this journey.
Hi Jamie. We had to take a 1st time home buyers class when we bought our 1st home. Part of the class talked about your situation and the person strongly advised that we not use any of these companies. He said that if you need someone to help you get out of debt there are several non profit organizations that you should look for. I would suggest going to your bank to see if they have a list of such agencies. Good luck!
I completely say go to Debt Reduction Services. There is a $75.00 fee that if you take 4 classes, and you can do it online, you will get that $75.00 back. We did this 2 years ago and had about $8,000.00 in credit card debt. Our debt will be completely gone in one more year!! They deal directly with the credit card companies, you don't have to. The credit card companies don't call or anything. We do get a statement from some of the companies and they show it being paid down. It is nice because you can either have it directly withdrawn from your checking account or you can bring in money orders. We chose to do money orders because we closed out our checking account. Anyway, we are excited to say that in 2 years (minus our mortgage) we will be completely debt free! Imagine having all that extra money coming in from the paycheck!! Oh and when we went in with our American Express they got the interest rate down to 0%. We don't pay more than 9% on any card through DRS.
The Best advice I have gotten is the Dave Ramsey tapes or his radio show on gettin on top of your finances... check it out. If you are looking for a way to possibly bring in more income let me know. I have a wonderful business opportunity at my fingertips. I feel like God has given it to me to share with other Mommies who want to stay-at-home. Being in debt can sometimes feels like you are up a creek with no paddle and NO Boat....:) Let me know what you think my email is [email protected]. Definitely look into those tapes they are well worth the investment. God bless!
Danielle
If you decide to go through one of these companies, please make sure to do your homework. Check with the local Better Business Bureau or chamber of commerce for references. It is probably smarter to go with a company in your home town, or close that you can sit down with personally instead of using one of the companies that advertise nationally and don't have a representative in your area.
Jamie-
I looked into a couple of these about 18 months ago when things were really bad for us - the problem I found with them is that you have to let your credit cards go into default (not pay them for a couple of months) and then the service negotiates payments with them.
It's all good -until you check your credit and it's shot because you were late on all your cc bills AND, if they write off any of the amount, it's not been "gifted to you" and you have to claim it as income on your taxes (the cc companies will send you the statement) -at least when we negotiated with American Express ourselves that's what happened!
Talk to the companies yourself - sometimes they'll work with you on the payment, interest rates.. if you can give them a lump sum to pay off the card, even if it's 1/2 the amount. If you can pay it right then, they may take it and you are done with that card (they will close the account).
Good luck - we're all there or have been!
Carrie
Hi Jamie
I wouldn't do it. They say it is okay for your credit but it is not. In order for them to start helping you, you have to stop paying on your bills for like 90 days so that they can make a case that you cant pay them well that doesn't stop the phone calls and reports on your credit. Also there are always fees and you usually pay the fees to them for the first year to then pay off the debt in 3 years so you pay them like 5k of your settlement. Why dont they charge a one time fee of 300.00 bucks and be done because that could be another 5k knocked off what you owe. Nobody does anything for free and the ones who wind up hurting is us. If you think there is no other way then really research it call the news channels and make sure but if it sounds to good to be true it usually is. I have just cut up all my cards and dont use them. Pay more then the minimum owed and slowly chip away at them. Then as my balances go down so do the interest rates and as my balances go down and my minimum payment goes down I just keep paying the original budgeted amount to chip away at it faster and if you are not using them at all then you will see the balances go down and you save your credit because you dont know what the future holds and when you might need that especially in a bad economy your good credit will help. Good luck I know how hard it is but we choose not to go the easy route but to learn the hard way and budget not use the cards and pay extra.
What I have found that worked the best for my family was the following. Choose your debt that has the highest interest and work to pay it off first (say a credit card at 15% interest) pay your minimum payments on everything else. Pay at least 2 times the minimum on that highest interest one (if minimum is 25 then send at least $50 but send as much as you possibly can). Once that card is paid off then you pick the next highest interest building debt. Take the amount you were paying toward the card you just paid off and add it to the amount you have been sending for this card. For example if you were sending the minimum $25 for the 2nd card and $50 for the first then when the first is paid off you would start paying 75 to the 2nd (or if you have been sending more you send more for the second). You continue doing this until all of your debt is paid off. To continue once the 2nd card is paid off you take that entire amount ($75) and add it to your next card. So if you are doing the minimums like in my example above then you would send $100 per month for the 3rd card and $125 by the time you are paying off the 4th one. As you pay off each card also you should close them and cut them up. No household needs more than 1 or 2 credit cards to fall back on in emergencies. This method can also be used to pay off car loans or even house mortgages. Once you pay off the higher interest debt then add that amount to your car or house loan. Hopefully that makes sense to you. You will really be surprised how quickly you can get things paid off doing this method. Don't fall into the pit of well now that I have one card paid off, that is extra money I can buy stuff with. Make your money work for you not against you. I got this method from a booklet called "One for the Money" It is put out by the LDS church. If you need more information about it (or want me to send you the pamphlet) just let me know.
Oh and by the way, you can negotiate with the credit card companies just like the debt counseling places do. Don't ruin your credit and let someone else be in charge of your money when you can do it yourself and be independent!
Do not use one of these companies! Everyone I know that has done this has gotten into bigger trouble because these companies do not pay on time if at all! I agree with everyone else that says to try Mary Hunt, Suze Ormand, etc. You can do it much better yourself. Good luck.
When I was faced with credit card debt my mom gave me a book called "Debt Free and Prosperous Living". I read it and paid off $18,000.00 of debt in a little over one year. What I did was take out a loan against my car title at my credit union for $3000.00 @ 3.99% interest. I also took out a $6000.00 signature loan @ 9%. I paid off my smallest credit card first. All of my cards were between 19% to 22% interest. Then I took what I was paying on the on the first credit card and combined it with the payment on the next credit card with the smallest balance and paid as much as I could on that each month. In the meantime, I paid the minimum payment on the car title loan and the signature loan because the interest rate was so low. After the second credit card was paid off, I took what I was paying on the first two cards and combined those payements with what I was paying on the next card. I did this until they were all paid in full. This totally works and I now pay off my credit cards in full every single month. It just takes discipline. At the time, I closed all of my cards except for one. I know you can do this. Just give yourself a time frame and go for it. Kristi
Hi Jamie!
Before you do that, I would check out Dave Ramsey's resources. He has a few books- Total Money Makeover and another that is part of his Financial Pease University. His steps are easy and will lead you to financial security- which is much better than simply paying off your debt. He lays out for you a simple way to pay off your debt quickly- no scams or gimmicks.
His website is http://www.daveramsey.com/ - this isn't some random guy- he has helping people to get out of debt for years, heis very established and has helped hundreds of thousands of people! He also had a program on Fox Business at 6pm.
I hope you find a solution and financial peace!
Hannah
I would check the company out very thorough as there are many that have been known to destroy your credit rather than help, check with better business and licensing to see if they are approved and if any complaints have been filed, this is one of those situations that can have bad consequences if you are not careful. I have known many people who have tried several of these companies only to end up in more debt and bankruptcy.
A year ago I read the book by Dave Ramsey, Total Money Makeover. We are following his steps and we are making real headway in our debt. Our credit card was $11,300 a year ago and we paid it off in September. The first step is to save $1000 in savings, so if you do have an emergency, use that money instead of using your credit card. List your debts in order from smallest balance to highest balance. Pay minimum on everything except for the lowest balance debt. Put a budget into place and pay any extra money you have towards debt #1. When debt #1 is paid off, take that minimum payment from debt #1 and put it towards debt #2 plus any extra money you can find in the monthly budget. Keep doing this "snowball" and by the time you get to your last debt, you are putting a huge amout toward that debt and it will be paid off in no time. If any time an emergency comes up and you need to use the money in savings, stop the debt snowball and pay minimum on everything until your savings account reaches $1000 and then continue on with the debt snowball. I recommend you read the book as there is a lot of other financial information in the book. Personally I myself wouldn't use a debt counselor because it would affect my credit. Also check out www.daveramsey.com for some information. I bought on his website his personal finance software and it has lots of forms on it and our favorite thing we use on is is the debt snowball. (https://beta.daveramsey.com/shop/downloads/software//prod726.html ) You can list all your debts, the interest and the term and it will tell you by using the debt snowball when you can be completely debt free! Ours says the year 2020, 14 years sooner than if we were not using the debt snowball! We are living proof that this system works!! Good luck in whatever path you choose:)