All About Debts

"Cut Your Payments in Half!" the headline screams. "Consolidate
Your Bills into One Low Monthly Payment!"

Debt Help When you see ads like this, they are often from Credit Counseling
firms. In this article, I'll explain the principles behind the
Credit Counseling approach and discuss the main problem consumers
face when they join one of these programs.

Credit card debt and consumer credit counseling can help lower credit card debt, student loans, and unsecured debt. Get free consolidation and counseling quotes Credit Advice and Resources Credit information and tips to help you find the best deals on credit cards, credit reports, manage your debt, and control your finances. .income tax attorney

Counseling Debt First, let's get our definitions straight. The term "Credit
Counseling" is actually quite misleading, since it has nothing to
do with preserving or improving your credit score. In fact,
Credit Counseling will often damage your credit, an unpleasant
reality that is sometimes downplayed by industry representatives.

From June 1, indebted. They will be providing you with budgeting advice and will also mediate with your credit providers to reach an amicable solution. You may approach a debt counselor directly for advice or you may be referred to a debt counselor by either a creditor or a magistrate’s court. When you apply for debt counseling, you cannot take on new loans or credit until you have paid all your debts and have received a clearance certificate from your debt counselor. You will also be listed on the credit bureau records as a consumer under debt counseling. Currently, the National Credit Act provides for a R50 application fee for debt counseling, but the department of trade and industry is considering changes to debt counseling fees.

Consolidation Consumer Debt Credit Counseling is a debt management program where you make a
single monthly payment to an agency. In turn, that agency
distributes the money to your creditors on your behalf, ideally
at lower interest rates so you can pay off the debt faster.
Credit Counseling should not be confused with Debt Consolidation,
Debt Settlement, or Debt Termination. Each of these debt programs
takes a very different approach from Credit Counseling.

With the change in the new bankruptcy law effective October 2005, it is now necessary for consumers to get credit counseling within the six months before filing bankruptcy. The credit counseling service must be from a government approved credit and debt counseling organization. //www.usdoj. cc_approved.htm

Debt Settlement Of all the available debt options, Credit Counseling is by far
the most popular, with millions of Americans participating. Does
this mean it's the best choice for most people struggling with
debt? No! There are numerous problems with this approach.

g) All legal notices may be served on Credit Health (Pty) Ltd, Block A, Dunkeld Court, 16 North Road, Dunkeld West, Johannesburg; h) Credit Health assists debtors to settle their debts by offering a credit check ( 1 Credit Report), credit monitor and credit management services together with the Debt Settlement Plan ( whereby " sum", " off" settlements are negotiated and facilitated for clients);

Debt Free In recent years, the Credit Counseling industry has been heavily
criticized by impartial consumer groups like the Consumer
Federation of America. But these criticisms often miss the mark
entirely. They usually focus on the aggressive companies that use
their non-profit status to trick consumers into thinking they are
charitable organizations, or even that their services are free of
charge. In reality, these outfits charge hefty "voluntary"
contributions, often adding up to hundreds of dollars, plus steep
monthly fees as well.

If you aren't disciplined enough to create a workable budget and stick to it, can't work out a repayment plan with your creditors, or can't keep track of mounting bills, consider contacting a consumer credit counseling service. Your creditors may be willing to accept reduced payments if you enter into a debt repayment plan with a reputable organization. In these plans, you deposit money each month with the credit counseling service. Your deposits are used to pay your creditors according to a payment schedule developed by the counselor. As part of the repayment plan, you may have to agree not to apply for, or use, any additional credit while you're participating in the program.(By the way, Consumer Reports magazine had a great article on Credit Counseling in their July 2001 issue. In the article they discuss private credit counseling companies as well as the traditional Consumer Credit Counseling Service organizations.)

Consolidation Debt Service However, I'm not talking here about the bad companies who provide
little or no actual "counseling," or the ones that are only in
business to make their owners rich. No, I'm talking about serious
problems with the actual business model itself. So let's take a
closer look at how Credit Counseling works.

Company Consolidation Debt Let's say you owe $25,000 on several different credit cards.
Let's also assume your average interest rate before you enrolled
was 20% (which is actually low these days, especially if you've
missed any payments). Your minimum monthly payments are $500,
which you've been struggling to keep up with. At this rate, it
will take a whopping 109 months (more than 9 years) to pay off
your debts, assuming you don't miss a single payment along the
way.

Consolidation Debt Online You enroll in a Credit Counseling program that promises to get
you out of debt faster. But does it? Assuming your creditors
agree to participate in the program (not always the case), the
real key is the concession they will grant on your interest
rates. In prior years, creditors looked more favorably on Credit
Counseling and they offered steep discounts off the normal
interest rates. But lately they have squeezed the industry, and
the concessions are not so good any more. Currently, most of the
major players will reduce interest rates down to a range of 7% on
the low side to 18% on the high side. We'll use 12% as the
average.

Consolidation Debt Free So if you keep your payments at $500 per month at the new 12%
rate, how long will it take? First, we need to deduct the monthly
fee charged by the agency. In this example, we'll use a fee of
$25 per month, so $475 of your $500 will go toward debt
reduction. The good news is you'll be out of debt faster. The bad
news is that it will still take 75 months (more than 6 years) to
become debt-free.

Debt Problem But what happens if you can't keep up with that $500 per month?
After all, you sought help from a credit counselor because you
were struggling financially, right? Let's say you drop down to
$450 per month. After deducting the $25 monthly fee, that leaves
$425 toward your debt plan. Now you're looking at 90 months (7
years & 6 months), which is not much better than the 109 months
you started out with.

Credit Debt So how can credit counselors claim to cut your payments in half?
Good question. If you dropped down to $250 per month, you'll
never pay off your debt! At 12% interest, the debt will climb
faster than your $250 per month can reduce it. The lowest you
could go would be $300 per month. However, it would now take 20
years to pay off the debt, hardly an improvement!

Advice Debt In order to truly cut your payments in half, down to $250 in this
example, the agency would need to completely eliminate all
interest! And even then, it would still take more than 9 years to
pay off the balance! So the ads claiming you can cut your
payments in half are simply false.

Card Credit Debt Eliminate Bear in mind here that in our example, we're assuming you're
working with a good company that charges low fees and actually
obtains good interest rate concessions from all of your
creditors. Even with the best of credit counselors, you're still
looking at a 5-9 year program to pay off your debts.

Debt Recovery That's why Credit Counseling is usually only effective for people
with short-term financial problems. Consumers with long-term
financial instability have trouble keeping up with the regular
payment stream required to make these programs work. The result?
Even the most favorable statistics show that about 3 out of 4
people drop out of Credit Counseling programs before completing
them.

Counseling Credit Debt If you do decide to join one of these programs in order to obtain
some short-term relief, be sure to do your homework first. Here
are a few tips to help in your selection:

Consolidation Debt Uk 1. Look for a company that actually provides old-fashioned budget
advice and counseling. If they want to sign you up right away
without first understanding your budget situation, move on!

Debt Reduce 2. Obtain copies of the contract and read it carefully before
signing up. Make sure you understand all of the fees involved.
Are there enrollment fees? "Voluntary" contributions? Monthly
fees? Extra fees per account? These hidden fees can add up to big
bucks.

Get Out Of Debt 3. Make sure they work with all the creditors on your list and
not just some of them.

Debt Destroy 4. Don't be fooled by "non-profit" status. That doesn't guarantee
you're dealing with a good company. And it certainly doesn't mean
the service is free!

Debt Negotiation 5. Aim to find a local company that you can visit in person.
Check out your target company with the local Better Business
Bureau.

Debt Elimination 6. Make sure they provide support after the sale. Try calling
their customer service number to see if you can get through
promptly.

Consolidation Debt Mortgage Remember, you can eliminate your debts if you take a disciplined
approach to your finances, make a budget and stick to it, and
don't use your credit cards unless you can pay off new balances
in full each month.

Collection Debt Good luck in your financial future!

Card Consolidate Credit Debt Charles J. Phelan has been helping consumers become debt-free
without bankruptcy since 1997. A former senior executive with one
of the nation's largest debt settlement firms, he teaches
consumers a do-it-yourself method of debt negotiation &
settlement. Expert training via audio-CD plus personal coaching
helps debtors achieve professional results at a fraction of the
cost. http://www.zipdebt.com/article1

Consolidation Debt Help Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation's largest debt settlement firms, he teaches consumers a do-it-yourself method of debt negotiation & settlement. Expert training via audio-CD plus personal coaching helps debtors achieve professional results at a fraction of the cost. To learn more, please visit http://www.zipdebt.com

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