Does paying off your credit card debt seem impossible when you can barely make the minimum payments? Have you unsuccessfully tried to create a budget only to give up or fail to stick to it?
A professional credit counselor can help make your debts and monthly payments more manageable. The following are methods agencies can use to improve your situation:
- Contacting your creditors about reducing your interest rate
- Contacting your creditors about reducing the monthly payment
- Contacting your creditors about dropping late fees
- Contacting your creditors about debt forgiveness for a one-time lump sum
In some cases, agencies might set up a plan that combines all your debts into one monthly payment. You are still paying each of your creditors. The counselor sets up a payment plan and manages the automatic payments.
Your payment plan may take three to six years to pay off.
If you miss a payment, it could derail the arrangement, such as increasing your rates or enforcing old late fees. You should only agree to a debt management plan if you can uphold your end of the agreement.
Some agencies charge a start-up fee and ongoing monthly fees to manage your debts. Ongoing charges may be a fixed amount or depend on how many accounts you have.
However, credit counseling agencies cannot negotiate with all types of creditors. A counselor cannot work with certain types of loans, such as:
- Education or student loans.
- Home loans.
- Car loans.
- Tax obligations.
You may need to seek another option if most of your debt is in the four above categories. With specific debts, like back taxes, you can work directly with a government agency. Several alternative options are available.