ANSWERS: 4
  • Well, first step, don't confuse non-profit with not actually making money off of you. :) If you have a lot of creditors and you owe them a lot of money, I think they are a good way to get yourself out of trouble. Others may be able to provide personal experience, but if you stay with one of the big names (LIke Cambridge of Genus) you should be OK. Basically what they do is work out deals with your creditors, when you send them one payment which they take a cut of then distribute the rest to those you owe. If you only have a couple creditors, you may be able to just work things out with them on your own.
  • My two cents: I have serious reservations about these places. They try to get you lower interest rates and reduced balances, but the primary thing that keeps you in debt is your own habits. A change in yourself is the only way to be out of debt long term. Their efforts might not get you out of debt as much as just keep you in debt longer, by reducing the required minimum payments and extending the terms of the loans. Also, under each entry on your credit report there is a line that reads either: "Paying as agreed" or "Not paying as agreed." If these agencies get your payments reduced, does their account show on your credit report as "Not paying as agreed"? If that's true, then using their service actually damages your credit. I avoid debt financing whenever possible. It makes things cost more than they are supposed to cost (due to interest) and makes me a slave to a bank. My advice would be to make a plan that will get you out of debt, and then work that plan and stay away from debt afterward. Best of luck with it.
  • Sketchy? Yes and no. There is a difference between debt consolidation and credit counseling. Both have been known to strike "deals" with creditors where you make the monthly payment to the consolidator or counselor and they pay creditors on your behalf. Unfortunately, there are pitfalls too numerous to list here, but a few examples are they never pay your creditors and keep the money for profit. Illegal but it happens. Or there are hidden charges that eat up a substantial amount that would otherwise be better used to pay the debt you received counseling for. If one consolidates there is also the danger of "forgiven debt" coming back to haunt you come tax time. Forgiven debt, in most cases, is considered taxable income. This is not to be confused with a creditor agreeing to lower your interest rate or waive fees. Most reputable agencies are members of the AICCCA and the National Foundation of Credit Counseling. Great source of information is http://www.bankrate.com
  • This is from my own experience. I was going through credit counseling. It was a big help for me. They were very helpful, understaqnding, and patient. Once the creditors began to receive their payments the collection agencies stopped calling. I had my payments drafted out of my account automatically. There was a fee. The fee was a LOT less than the interest. I was able to get my interest lowered. On one account I was able to get the interest completely dropped. After about 2 monthes I called the collection agencies and they varified that they were receiving the agreed amount. Every penny that was drafted out of my account was accounted for. I received monthly statements from the credit counselor that stated where the money was going. It was great. When I paid off one account the money was applied to another account to pay it off faster. After 6 monthes I was able to use the credit counseling as a reference because all of my payments were of the correct amount and on time. That was the key was on time. As far as affecting your credit. If you are making payments on time and are not behind it can hurt your credit. If you are already behind and your accounts are in collections it can help your credit by establishing on time payments. To choose a credit counselor I would look through the Better Business Bureau. I went through Cambridge Credit. They recently went through a law suite because of their fees and claiming that they were non-profit. I was customer of theirs before and after their law suite. Since their law suite they have corrected their fee problems. Their service and advice was great even after the law suite. Don't let this scare you. My advice is to check with the BBB and once you start sending your payments call your account holders and varify that they are receiving the agreed amount.

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