If you need help getting your debt under control, you might consider looking into credit card debt relief programs. It’s important to find a debt relief program that works for you, because there is no one-size-fits-all program when it comes to debt relief. Your situation is unique, and the debt relief program you choose should be customized to fit your financial life! Here are our tips on how to choose the best credit card debt relief programs:
Assess your situation.
Take a look at your overall financial picture. Have you been able to keep up with your credit card bills or are you missing payments? What is your debt to income ratio? Are you living paycheck to paycheck? Do you have an emergency fund? Do you live within your means? The answers to these questions will determine whether or not you should consider outside help from a credit card debt relief program.
Do your research.
Next, do your research to see what kind of help is available. There are hundreds of companies that claim they can help you pay off your debt, but not all of them will be right for you. There are also a lot of debt relief scams out there, which is why it is important to thoroughly research any debt management company before you decide to work with them!
What should you be looking for exactly when researching? A few things to check when you start looking into these companies are their fees, their licensing, and nonprofit status. It’s a huge red flag if they charge exorbitant fees that you must pay upfront, or if they are unwilling to waive fees for low-income clients. Additionally, it’s important to make sure that they are licensed to do business in your state. All of their credit counselors should also be licensed. Finally, a reputable debt relief agency should be a nonprofit. There are some companies, like debt settlement companies, that are just out to make money off of your debt. You want to find a company that can genuinely help you without charging fees that cost more than you owe in debt.
Don’t be afraid to ask questions.
When you finally call an agency that seems like they are a good option for you, don’t be afraid to ask questions. If they are a legitimate nonprofit, they are there to help you. Don’t commit to any debt relief agency until you have had all of your questions answered. It’s important to fully understand what any debt management or debt consolidation program entails before you decide if it’s right for you.
Common Credit Card Debt Relief Programs
Now that you know what to do in order to find reputable credit card debt relief programs, here are some common types of debt relief that you might come across:
- Debt consolidation programs
- Debt management programs
- Credit counseling
- Bankruptcy counseling
- Debt settlement
While these all might sound similar, they have different ways of dealing with their clients’ debt. Many of them use similar methods, such as combining debts into one monthly payment for you, and distributing the money to creditors on your behalf.
However, when they distribute the payment and how much that payment is can vary depending on whether you choose something like debt management or debt settlement. In a debt settlement program, you’ll have a low monthly payment because you are not actually paying off the principal amount of debt that you owe. The money you save from this can be counted as income by the IRS, so there will likely be tax implications. Additionally, a debt settlement company will wait to pay your creditors until your accounts go into collections. You may end up receiving harassing phone calls from debt collectors during this time. As you may have guessed, not paying the full amount of debt will also result in your credit score being negatively impacted.
In a debt management program, you still have a lower monthly payment than what you normally pay. This is because the nonprofit credit counseling agency negotiates with the creditors to give you lower interest rates and waive fees. You are still paying the principal amount, so your credit score will not suffer, nor does this have tax implications.
If you are struggling with credit card debt, ACCC can help. Call 800-769-3571 today to speak to one of our certified credit counselors!