- 4 min read
- Make sure the Debt Consolidator gives you a comprehensive analysis of all your debt relief options.
- Check industry information, like the AFCC's Web site, for information about debt settlement companies.
- Check Bills.com reviews about Debt Consolidators.
Learn About Finding a Reliable Debt Consolidator
Being in debt is no picnic. Creditors and collection agencies calls, letters and threats of legal action are stressful. However, don’t let that stress cause you to make bad decisions. There are real solutions, which vary depending on your situation.
Two main debt relief solutions are Credit Counseling -Debt Management Program (DMP) and Debt Settlement. Debt consolidators in these fields can help you solve your debt problems, and avoid bankruptcy and stop collection calls and procedures. You want to find the best debt consolidators and avoid companies that do not deliver, or even worst have fraudulent activities.
Here are three areas to review when looking for the best debt consolidators:
- Product Offering
- Industry Information
When you look for the best debt consolidator, compare each company across these four areas:
- Service Offered: Which type of service is the company offering? Some companies specialize in one type of debt relief. The company may try to push their product. Learn about the other products available, and ask why their product is better.
- Disclosures: The debt consultant should outline the pros and cons of the program, and set out a realistic period. It takes about 5 years for a DMP to be completed and 2-4 years to complete a debt settlement program. In addition, the counselor should clearly explain services offered, fee schedule, impact on your credit score, and what are the administrative procedures and your tasks to make the program a success. Make sure that the debt consolidator presents you with a clear written proposal before signing a contract.
- Counseling session: The first session with the debt consolidator representative should be a lengthy session, at least 30 minutes or more, depending on your situation. The representative will review your financial situation and then make recommendations. Just as getting into debt didn’t happen overnight, so it will take time to deal to be debt free.
- Fees: The preliminary review should not cost you money. If you are dealing with a Credit Counseling service, then be aware of a large up-front fee. Credit counseling fees should not exceed $50 monthly. Debt settlement firms that talk to their clients on the telephone are not allowed to charge a fee until the company reaches a settlement.
Being a member of an industry organization does not guaranty that their members will provide good service. However, membership in an industry group probably indicates some longevity in the business, and may show the company follows industry best practices. No matter which type of company you choose, check out what type of qualifications your counselor has.
Credit Counselor and Debt Management Program Consolidators:
There are both for-profit and non-profit companies that offer Credit Counseling services. Counselors are generally required to be accredited. Two organizations that represent non-profit credit counseling services are the AICCCA and the NFCC.
AICCA: According to their Web site, The AICCCA (The Association of Independent Consumer Credit Counseling Agencies) "is a member-supported national association representing non-profit credit counseling companies that provide consumer credit counseling, debt management, and financial education services".
NFCC: According to their Web site, the NFCC (National Financial Credit Counselor "is the nation's largest and longest-serving nonprofit credit counseling organization, the NFCC has played the key role in providing financial counseling and education to consumers for 60 years."
Debt Settlement Consolidators:
For debt settlement, look for a membership in AFCC (The American Fair Credit Council - formerly TASC). The American Fair Credit Council (AFCC) is the leading industry trade group in the debt settlement industry. They require a strict code of contact and compliant with FTC Rules, including compliance with no fee until a debt settlement. The AFCC has a two-tier system, which have different levels of reporting and compliance to their standards. For more information read the Bills.com article about debt settlement companies.
When reviewing the company also check these two factors:
- Longevity: Learn about the debt consolidator’s past history, including how long it has been active. A long history can be an indicator of more experience and knowledge in underwriting requirements and negotiation tactics. Check out the BBB site for general information. Remember that the number of customers should analyze the number of complaints, as well as how well the company dealt with the complaints.
- Check Employee Accreditation: Check out the qualifications of the employees who work for the debt consolidator. Are they IAPDA (International Association of Professional Debt Arbitrators) members, or do they have other qualifications? Although being IAPDA accredited does not guarantee good service, it helps to determine that the person has undergone training and passed a test showing competence to deal with a complicated subject. If you feel that a counselor or debt consolidator representative is not giving you good service, ask the company to provide you with a different agent.
Bills.com offers you reviews about many debt consolidators. The reviews cover a wide variety of debt consolidators including:
- Banks and lenders who offer personal loans to consolidate debt
- Credit Counseling Servicers
- Debt Settlement Companies
The reviews will aid you in gaining general knowledge of the debt consolidators, as well as what consumer think of their services.
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Dealing with debt
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q2 2023 was $17.06 trillion. Auto loan debt was $1.582 trillion and credit card was $1.031 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
The amount of debt and debt in collections vary by state. For example, in Nevada, 32% have any kind of debt in collections and the median debt in collections is $2054. Medical debt is common and 16% have that in collections. The median medical debt in collections is $806.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.