In addition to directly contacting banks and lenders, consumers can get assistance from a debt management plan from other organizations and companies. They are known as credit counseling agencies, and they should be able to help you determine whether a DMP will work for you and your particular financial situation.
Debt help from Consumer Credit Counseling Services (CCCS):
The leading agency that can provide you relief from your credit card debt and bills, and to a lesser extent medical debt, is Consumer Credit Counseling Services, which is part of the National Foundation for Credit Counseling (NFCC), Inc. They operate in about 850 offices in communities throughout the nation.
How can CCCS help me?
Here is how they operate. The agency will review your situation, and if they think a debt management plan is the best option for you, then they will proceed. A representative will contact your credit card issuer and try to negotiate a lower interest rate and reduce your monthly payment with the companies in question. After consulting with you, they will try to lower your monthly payments to a level that you can afford to pay. In addition, they will try to stop all late fees and over-the-limit fees on your account. If you decide to negotiate yourself, find negotiating tips.
After the negotiations with the credit card issuers and your lenders is complete, you will then need to make a single payment to the Consumer Credit Counseling Services agency. This simplifies the payment process. The organization will then disburse that payment to all of your creditors on your behalf. This credit agency will charge you a monthly fee for their services, and there may be a small up front fee as well. But the plans have been shown to have a very high success rate. Most of the debt management plans will last three to five years. After this timeframe your existing credit card debts will generally be paid off, but of course that will depend on how much you started with.
Does a Debt Management Plan reduce my balance?
Very rarely. A debt management plan doesn't usually reduce the balance on your accounts, but one of the big advantages of the program is that the interest rates you pay will go down, and it is usually significantly. Most people who came to CCCS were paying very high interest rates from 25 to 29 percent. Usually the rates were high as a direct result of past payment problems and unpaid bills. After successful negotiations with the lenders and banks, the rates usually drop to 6 to 12 percent, or sometimes even lower! Find out more of the benefits of debt management plans.
What if I can't pay the monthly fee for a DMP?
With the difficult economy, these days far fewer people can afford to pay the monthly fee for the traditional debt management plans, no matter how low the fee is. As a result of this, two national credit counseling groups struck a deal with the top 10 credit card issuers, including Bank of America, Wells Fargo, and others to make the debt management plans offered directly by the credit card issuers and banks more affordable. More on assistance programs from credit card issuers. The programs now being offered may include lowering the minimum payment on your monthly bills, providing additional hardship programs, and also reducing the interest rate even further.
Will a DMP hurt my credit rating?
This is a gray area. Participating in these DMPs will not necessarily hurt your credit score, but it is unknown and the answer is not very clear. It will come down to how your creditor reports your payments and history to the credit rating agencies. However, even if they do report it and your credit score is lowered, getting out of credit card debt needs to be the priority, and if you do this, your credit score will eventually improve. Missing payments on your bills will remain on your record for seven years, so missing payments is a much worse alternative.
Does Consumer Credit Counseling Services offer other support?
Yes. They can advise you on managing and saving your money .Most will help clients create a realistic budget. They can offer you other solutions to your current financial problems beyond a DMP. Last, but not least, they can help you develop a personalized plan to help you prevent future difficulties and stay current on your bills and debts.
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