The biggest hurdle for people with credit problems is to admit that they do have a problem. To some people, this admission is like a declaration that they are inferior to others or that they are not “normal”. Well you do not have to be embarrassed by this. Everyone has their own set of problems. It just so happens that your concern money. Even doctors can fall sick. That does not mean that they are not qualified to do their jobs.
If you do finally decide to seek professional help or your family members insist that you do, you will probably end fixing a meeting with a certified counselor at preferably a reputable agency listed with NFCC. The services that you can expect to see include
- Tabulating repayment plans based on your debts and affordability
- Educational and training session to participate in
- Consolidating a lump sum from you monthly that is distributed to your creditors
- Personalizing your budgets based on your real income and expenses
- Timely repayment to your creditors with possible lower interest rates
Even though these agencies have supposedly good intentions. There are still warning signs to look out for in case they do not really have your best interest at heart. Sometimes they might even have a conflict of interest somewhere embedded within the organization. Red flags can include
I’m your master from now on
- Excessive fees. What an irony if the people who are suppose to help you get out of debt puts you deeper in debt. Most agencies will charge a small administrative fee accompanied by an affordable monthly fee.
- Requesting too much detailed information. You should be getting free information about what they can do for you. But if they are already asking for detailed information before you even signed up, they could be segmenting you to throw a sales pitch at you. Lead generation is a big business that people pay good money for.
- Expensive educational materials. Most agencies will give you material for free. Or you could also pay a small courtesy fee to get access. If you are being heavily pitched to buy an expensive textbook to get debt free, you should be careful.
- Even though you cannot expect anyone to work for free, counselor supposedly are driven and motivated to help out those with debt issues. So even though someone cannot afford their reasonable charges, they would usually find some other ways to help you even at a lesser extent. Those who turn you away when you reveal you have cannot afford their fees do not deserve your attention anyway.
- Agencies that refuse to analyze your finances unless you sign up to their programs
- If employees are paid by commissions instead of being salaried, you really cannot fully trust the motivations that are driving their behaviors.
- Radical claims. No one can guarantee anything when it comes to credit. Have some common sense in dealing with them. You want to work with a counselor, not a salesman.
Now that your counselor has passed you first screening, you could be open to enrolling in their debt management plans (DMP). At this stage, you should ask more questions regarding the details to ensure that the DMP indeed serves your best interest. Here are some questions to ask.
- How does their particular DMP work? You want one that repays your creditors on time so that you do not incur late fees and more interest. This can sound like an implicit requirement. But you will be surprised to find that some plans do not serve these specific objectives.
- Will any form of upfront payment be required for any particular creditor? You will need to verify this if the answer is yes.
- Will creditors continue to send you the regular statements for review? If the agency has taken over the case, you could be receiving their custom reports. Even so, you need to keep track of repayments and balances as your credit record is at risk.
- Will they make counter proposals to creditors for lower interest and fees? Many agencies claim that they do, but you will never be able to verify that. Even if a lender really lowers the rate, it could be their own doing instead of persistence from the agency. If you really want to know, the best is to ask the lender yourself.
- Will the staff offer any assistance should you not enrol in DMP? You would ideally want a positive answer. If the answer is no, the vision of the agency could be questionable.
- Which are the debts that are covered in the DMP? There could be some items that are not within the parameters of the DMP. These other debts have to be repaid separately on your own. Don’t feint negligence as you must take responsibility and ownership of your own problems.
Remember that a DMP is not the magic pill to your problems. It is just part of the solution. Be mindful of which debts are included in it and what are not. You will need to keep track of everything so that your credit do not suffer too badly. If you have to, you might even contact creditors to verify that they have accepted your proposals.