When do I know I need debt
counseling?
There is no specific amount of debt -- whether it's
$5,000 or $50,000 -- that denotes you need a debt
counselor. You need to consider how much income you
have each month, what your expenses are and what
your financial plans are. If you can plan a way to
get out of debt yourself, that may be your best bet.
If you feel helpless, overwhelmed or can't figure
out a plan, you may need debt counseling.
How do I find a good debt counselor or credit
counselor?
When shopping for help, either for a credit
counseling agency or a debt consolidation agency,
keep in mind that just because a company claims to
be nonprofit, doesn't mean it has your best interest
at heart. Be wary of a company that immediately
urges you to join a debt management plan without
giving you your options -- they should take an
interest in your particular issues and give you a
complete financial analysis, not throw you toward a
cookie-cutter plan, but doing what is best for you.
How long will it take me to pay off my debt?
It depends on the interest rate you are paying
and how much you can pay out each month. The more
you pay, the quicker the balance disappears. For
example, if you paid only the minimum amount due on
$8,000, which is the average amount of individual
household credit card debt, at an average annual
percentage rate of 13.9 percent, it would take 278
months to be rid of your debt. In that time, you
will pay $6,792.25 in interest.
Will credit-counseling affect my credit?
Using a debt-management plan to pay off debt
won't hurt your credit score, but it may make it
difficult to qualify for new credit.
When you enroll in a debt-management program, you
write a monthly check to a credit-counseling agency
and the agency pays your creditors. A
debt-management plan usually lasts three or four
years. A comment stating that you're paying an
account through a credit-counseling agency appears
on your credit report and remains until the account
is paid in full. Such a comment won't hurt your
credit score in the least.
Will debt settlement affect my credit?
Yes, your credit will be affected. How much it
declines depends on your original circumstances when
entering the program. When the settlement is
complete, we will send you the settlement document
that you will then send to your reporting bureaus
showing that it is “settled and paid with a “0”
balance.” When you have completed the program and
all your debt is paid in full, your credit will
begin to heal itself and you will be able to regain
your purchasing poser over time without the long
term effect of a bankruptcy as a public record.
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