![]() ![]() However, participants in a debt management program also need sources of income so that they can start paying off those balances and other IOUs. Suitable for: The programs can make sense for people with modest financial stress who need an affordable payment plan featuring lower interest rates on credit card balances. "Collection calls are terrifying to most consumers." 1 reason people contacted us wasn't to save money but to stop the calls," Sullivan said. Take Charge America surveyed its clients six years ago and learned something surprising. "The No. In fact, over time, scores should improve as more debt gets paid down.Ĭreditor phone calls: These typically stop, as creditors receive payments as part of a debt management plan. Impact on credit scores: Enrolling in credit counseling or a debtmanagement program usually doesn't result in lower credit scores. Over a five-year program, a consumer might incur a few thousand dollars in fees. ![]() At Take Charge America, for example, debt management services cost $50 to $75 or so to set up and $50 to $75 a month after that, Sullivan said. (Secured debts are those tied to collateral or property such as a home mortgage or vehicle loan.)įees: Credit counseling is offered for free, though fees apply on the debt management programs. Some agencies also give counseling guidance on student loans. Types of debt included: Credit card balances are the focus but other unsecured debts can be addressed too, including unpaid medical bills and payday loans. However, these entities don't negotiate lower debt balances. In addition, debt management entities often try to get lenders to waive late-payment and other fees, which also can lower payments, Sullivan said. "We try to negotiate single-digit rates," said Mike Sullivan, a spokesman for Take Charge America, a Phoenix nonprofit that offers creditcounseling and debt management services.įor a consumer who might be paying 20% or more in interest on credit cards, a rate cut to 3% or 4% can represent significant savings. In these latter programs, agencies negotiate with credit card companies and other creditors to lower interest rates on a consumer's debt, thereby also reducing payments and combining multiple payments into one. ![]() Many of these entities also enroll struggling consumers in deb management plans lasting up to five years. Many credit counseling companies and nonprofit agencies provide budgeting and other financial education help to consumers in need, for free. If you are among those facing a severe strain, here are three processes that can help, though all come with different benefits and drawbacks. Hudson sought to have some of her outstanding balances waived by contacting a debtsettlement company, but there are other options, too. “Before I knew it, I was swallowed up in trying to find a way to make minimum monthly payments on almost $19,000 in debt,” she said, in addition to a car payment, rent, utility bills and other expenses. ![]()
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