There are plenty of legitimate nonprofit debt management organizations whose aim is to assist consumers better manage their finances. These services include budget counseling, debt management and settlement plans, housing counseling and bankruptcy advice. The key is seeking out consumer agencies that don't charge exorbitant fees and don't promise more than they can reasonably deliver.
Good Resources
The best nonprofit resource is the National Foundation for Credit Counseling. This agency is the nation's longest running organization devoted to helping consumers learn how to best manage their finances. The NFCC gives free one-hour initial budget consultations and can assist with debt management plans, credit counseling, housing counseling and bankruptcy assistance.
After speaking with the NFCC, your next stop should be the Better Business Bureau. At the BBB's website, you can research the counseling agency you've decided to work with. You'll be able to find their BBB rating as well as review complaints. Aim for an "A+" or "A" rating.
Top Picks
The website "Top Ten Review" recently ranked the best consumer debt relief agencies according to a rigorous list of criteria, including accreditations, website navigability, educational resources, financial tools and calculators.
The best overall picks included Springboard Credit and Money Management International, both members of the NFCC. Also selected were CareOne Debt Relief Services, AAA Fair Credit, and American Consumer Credit Counseling, who are accredited by legitimate debt agencies, although not as prestigious as the NFCC.
Debt Management
After the free initial consultation, your counselor will decide if you are eligible to participate in a debt relief program. If you decide to participate, the counselor will negotiate with your creditors on your behalf. In exchange for closing your credit accounts, your interest rates, fees, and payments may be lowered. Your debts will be paid in full within five years.
Please note that a debt management plan is not a loan. It can also affect your credit score, something to consider if you will need to apply for a loan in the near future. However, participation in a debt management plan is preferable to late or missed payments.
Debt Settlement
The NFCC can also advise you if you decide to attempt to settle your debts. In a debt settlement, a counselor negotiates a partial payment of your outstanding debt and the creditor accepts this as final payment. Note that this is not "payment in full," and your credit report will indicate that the account was "settled." Your credit rating will plummet. However, if you are already several months behind on your bills, your credit is severely damaged already.
If you decide to settle your debts, use a reputable agency. Check the agency's reputation carefully, as it's not uncommon for unscrupulous companies to collect huge fees and payments, only to disappear, leaving the consumer worse off than when he began.
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