If you are facing a lot of debt and uncertainty, you may be hesitant about paying for any kind of debt consolidation service. However, it may be the best way to get your finances back on track. Let’s walk through the cost of debt consolidation and how to choose the right company.
Choosing the Best Company for Debt Consolidation
There are so many companies out there with many claims- some true some not- of helping with debt reduction. When it comes to debt consolidation, you must first choose a reputable company that is not after profit but your best interest in mind. So let’s find out what a good debt consolidation company looks like and then figure out the cost of debt consolidation.
- Choose a non-profit credit counseling organization rather than a for-profit one. A non-profit credit counseling agency’s sole mission is to help its customers, and non-profits’ fees are typically minimal.
- Check with the Better Business Bureau (BBB) for information on the company. A high grade from the BBB means that you’re likely to receive good customer service from the agency.
- A company with seven to ten years in business or more is typically a better choice than a brand new one.
- Make sure they have continuous support throughout the process.
Reviewing the Options and Cost of Debt Consolidation
The first way to sort out debt consolidation options is the primary type of service that they offer. It’s best to think twice before doing business with:
- Companies touting some type of debt settlement solution. Debt settlement can have a profoundly negative impact on your credit; fees are typically high; some creditors may refuse to participate in the settlement, and you may be taxed on the difference between the lump sum you paid and the total amount you owed.
- Companies pushing loans for debt consolidation. When you borrow more money to pay off existing credit card debts, the interest rate on the loan is often steep; and you may start using your paid-off cards again and wind up in even more debt than you are now.
You’re better off steering toward companies that can consolidate your debt into one monthly payment without shorting your creditors, and without you doing any additional borrowing. This type of arrangement usually has a monthly fee based on a number of accounts they are managing for you. Plus, it comes with a cap that adheres to Federal or state laws.
Review of ACCC’s Debt Management Program
American Consumer Counseling is a non-profit credit counseling agency offering such services. ACCC’s Debt Management Plan (DMP) enrollment fee is $39 and may be reduced or waived due to hardship. There’s a monthly maintenance fee of $5 per account included in the program, but the maximum fee is $35. This fee is waived for active military.
Here is an example of some of the money saving benefits offered through a debt management plan through ACCC between paying on your own vs the DMP:
|Type of repayment||Self||DMP|
|Amount of debt||$15,000||$15,000|
|Number of payments||85||57|
As you can see, a DMP saves this consumer nearly $10,000, and the debt is paid off much quicker. When you need to start the debt consolidation process, remember the criteria stated above to choose the best company for you and your finances.
To speak to a credit counselor today about budgeting and managing your finances, call 800-769-3571.