Good Way To Get Out of Debt

A good way to get out of debt is to determine where you're at financially, and make a plan to accomplish your goals.

You want to get out of debt and do it as fast as possible.  You want to get that feeling of lead off your back.  You want to sleep again.  You want to go to the mailbox and not cringe when the bills show up.

The obvious first step is you need to design a get out of debt plan.  So lets look at how you might do that.

Credit Counseling:

If you’re not disciplined enough to create a workable budget and stick to it, can’t work out a repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting a credit counseling organization. Many credit counseling companies are nonprofit and work with you to solve your debt worries. But be aware that, just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate. In fact, some credit counseling institutions charge high fees, which may be hidden, or urge customers to make “voluntary” contributions that can cause more debt.

Most credit counselors offer help through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many schools, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your fiscal institution, city consumer protection office, and friends and family also may be good sources of information and advise.

Honest credit counseling institutions can advise you on managing your money and debts, help you come up with a budget, and provide free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire fiscal state of affairs with you, and help you develop a personalized plan to solve your money issues. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.

Debt Management Plans:

If your fiscal issues root from too much debt or your inability to repay your debts, a credit counseling company may recommend that you enter in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial state of affairs, and has offered you customized advice on managing your money. Even if a DMP is right for you, a well known credit counseling organization still can help you create a budget and teach you money management techniques.

In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card debts, student loans, and medical debts, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees, but check with all your creditors to be sure they offer the deal that a credit counseling organization describes to you. A reputable DMP requires you to make regular, timely payments, and could take 48 months or more to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You may have to agree not to apply for — or use — any additional credit while you’re participating in the plan.

Protect Yourself

Be untrusting of credit counseling organizations that:

charge high up-front or monthly fees for enrolling in credit counseling or a DMP.

pressure you to make “voluntary contributions,” another name for fees.

won’t send you free information about the services they provide without requiring you to provide personal fiscal information, such as credit card account numbers, and balances.

try to enter you in a DMP without spending time reviewing your financial state of affairs.

offer to join you in a DMP without teaching you budgeting and money management skills.

make mandatory that you make payments into a DMP before your creditors have accepted you into the program.

Damage Control

Turning to a company that offers help in solving debt issues may seem like a smart solution when your debts become unmanageable. But before you do business with any company, check it out with your state Attorney General, state consumer protection authority, and the Better Business Bureau. They can tell you if any consumer complaints are on file about the firm you’re thinking of doing business with. Ask your state Attorney General if the company is required to be licensed to work in your state and, if so, whether it is.

Some companies that make available to help you with your debt worries may charge high fees and fail to follow through on the help they deal. Others may misrepresent the terms of a debt consolidation loan, failing to explain some costs or mention that you’re signing over your home as collateral. Businesses advertising voluntary debt reorganization plans may not explain that the plan is a bankruptcy filing, tell you all that’s involved, or help you through what can be a long and complicated process.

In addition, some companies guarantee you a loan if you pay a fee in advance. The fee may range from $100 to several hundred dollars. Resist the temptation to follow up on these advance-fee loan guarantees. They may be not be legal. It is true that many legitimate creditors offer extensions of credit through telemarketing and require an application or appraisal fee in advance. But legitimate creditors will not guarantee that the consumer will get the loan — or even say that a loan is probable. Under the federal Telemarketing Sales Rule, a seller or tele-marketer who guarantees or represents a high likelihood of your obtaining a loan or some other extension of credit may not ask for or accept payment until you’ve received the loan.
You should be cautious of claims from so-called credit repair clinics. Many organizations appeal to people with poor credit histories, promising to fix up credit reports for a fee. But you already have the right to have any inaccurate information in your file corrected. And a credit repair clinic cannot have accurate information removed from your credit report, despite their claims. You also should know that federal and some state laws prohibit these companies from charging you for their services until the advise are fully completed. Only time and a responsible effort to repay your debts will improve your credit report.

If you’re thinking about getting help to improve your debt situation, do some homework first. Find out what advise a business provides and what it costs, and don’t rely on verbal claims. Get everything in writing, and read your contracts cautiously.

All the best to you!