11 Easy Ways to Spot a Get Out of Debt Scam
Have debt worries? Here is how to avoid being swindled.
Not sure how to get out of debt? Start with nonprofit credit counseling.
If you got to this page, it means you know you need help with your debt. Congratulations! That’s your first step toward debt relief. There are many methods of getting out of debt, but the best place to start is usually with nonprofit credit counseling. They can help you decide which direction you should go.
Credit counselors who work for nonprofit organizations are focused on finding the best solution for your debt and helping you understand all of your options. They won’t drive you into one solution because that’s what they’re selling. If you feel lost and don’t know where to turn to find debt relief, they are usually your best bet. The initial consultation is also free, which allows you to understand your options and find the best solution for your needs without incurring another bill. For-profit credit counseling services will charge fees.
Unlike most for-profit credit counseling services, nonprofit credit counseling services focus on giving you an impartial view of your finances and helping you find the best debt relief solution for your particular situation.
Think about it. Do you really know the differences between using a balance transfer credit card, a debt consolidation loan, a debt management program (DMP), debt settlement, and bankruptcy to get rid of your debt? Even if you know what all of these are, there are nuanced details that the average consumer just doesn’t have a reason to know. It’s a credit counselor’s job to understand all of these debt relief options so you don’t have to. And at a nonprofit, the counselors have no financial incentive to try to sway you toward any particular solution.
Nonprofit credit counseling agencies do more than just credit counseling. In addition, they provide free financial education to ensure that their clients who get out of debt, stay out of debt. These companies are fantastic resources for improving your personal finance knowledge.
Because these companies are nonprofit organizations, all of their money comes from donations and grants. Most of these grants come from credit card companies. Creditors fund credit counseling agencies because these services help rehabilitate their customers who face challenges with debt. What does this mean for you? It means you will not be pressured into one solution or another just so the counselor can earn money from your fees.
Otherwise, the process is similar to other credit counseling services. Counselors will guide you through the process that’s best for you, helping you to get rid of all your credit card debt. They may also be able to help you pay off other unsecured debts, such as medical debt or even some payday loan debt (except for student loan debt). You can tell debt collectors that you are working with an agency and they will stop bothering you. They will even teach you how to budget and other valuable money management skills.
You see, counselors at nonprofit credit counseling agencies place heavy emphasis on improving your overall financial literacy and long-term financial health. They want to make sure that those who graduate from the program never have to come back.
Credit counseling and enrolling in a debt management program won’t usually negatively affect your credit reports or credit scores. During the initial consultation, the credit counselor will do a “soft pull” to check your credit report. Soft inquiries like this don’t affect your credit. If you end up enrolling in a DMP, your debts will be consolidated into one monthly payment that you send to the agency. Your payments will often be lower than before but you will still pay off all your debt; you just do it in a more efficient way. As a result, many people see at least some improvement in their credit after they graduate from the program.
The initial free credit counseling consultation takes about half an hour. In that time, you and the counselor review your debts, credit and budget to find your best option for relief.
On average, consumers who enroll in a DMP will take 3 to 5 years to pay off their debt completely. This takes longer than other options like debt settlement or bankruptcy, but it’s much better for your credit score.
After you complete the program and you no longer need your credit counselor, all of the accounts that were enrolled will generally be closed. On your credit reports, they will show up as “paid in full.” Closing the accounts may cause a temporary dip in your credit score, but it should go back up shortly after.
Like the debt settlement industry, credit counseling is vulnerable to scammers. Before reaching out to an agency, make sure they are members of a national trade association, such as the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). You should also check their rating with the Better Business Bureau.
Never give away your information to a company you haven’t verified. You’re already in debt – you don’t want to add identity theft to your list of problems. Also, don’t trust anyone that says you have to pay up front. You may never see that money again.
Nonprofit credit counseling is a good place to start if you are uncertain about the best path forward for your financial situation. Credit counselors at nonprofit agencies make sure you find the solution that’s right for you and they help educate you about personal finance. It’s a win-win.
Article last modified on June 27, 2019. Published by Debt.com, LLC