I here lots of ads on the radio and on TV about places cutting your credit card debt and lowering interest rates etc. I see some that say you must have over 10k in credit card debt. How do these places work? Are they legit? What does it do to your credit??
Caveat emptor. It is putting your financial future in hands of people who don't necessarily recognize their fiduciary responsibility. And they charge you handsomely for their services.
They charge handsomely, sometimes they pay the creditor, sometimes they don't. Some are schemes where they tell you that our money isn't legal, therefore the debts aren't legal, and it goes from there. Stay far away from those who advertise like that. There are a few non-profit ones that are genuinely helpful. But being non-profit does not necessarily mean they are not a scam. Several have been shut down by state Attorneys General. If you learn some basic budgeting, cut back on your spending, and put the amount you would pay the counseling service on your debt, you'll make a lot more profit.
I agree with all of the above. However, as to what it will do to your credit . . . it is perceived much like a bankruptcy insofar as the creditors who agree to participate will mark the accounts as being in some fashion of re-payment plan. This is indicative of the notion that you cannot pay as agreed. Same as bankruptcy except you are paying this debts. As espoused above, you also run the very real risk of accounts being paid late and repeatedly late which will destroy your scores. Two better options are to 1) simply file bankruptcy if you are insolvent or 2) raise your scores to a higher level to take advantage of balance transfer offers. Your scores may be sufficent as is.
Taking Apex's point one step further, if Option 2, above, is not viable -- it usually isn't by the time the debtor reaches considering such action -- then Option 1 should be the method of choice. The Bankruptcy Trustee is monitored by the Court, and the Court oversees the execution of the plan. Credit counseling agencies have no codified oversight, nor is there any recourse if they don't perform as agreed other than filing suit for damages. The stick wielded by the Bankruptcy Court can be very strong and works in the debtor's favor.
What is it your trying to accomplish here? A quick statement of objectives would be helpful. If you are just looking to save some money on interest rates and accumulation, most of these firms will end up costing you more in the long run (as far as total impact to your financial health). If it is financial management advice you need, then you may want to check your state's website for referred "counselors", but be wary. Investigate thoroughly any firm you contact, and make sure you know all the terms and conditions. If your situation is that dire, a consultation with a bankruptcy attorney may be of value to you. BKs generally require courses in financial counseling now, so this may be covered in your consultation. The critical information needed to properly advise you is: "where are you now", and how great is "damage". In short, there are no magical solutions to excessive debt, all solutions have their costs and benefits. A better picture of your situation would help, either here on the forum, or in concultation with a financial/legal professional.
I heard an ad for one of these on the radio and it sounded like they just wanted to sign you up for a loan to refinance the debt. Chances are it would not be the most favorable of terms...
An add-on to the critical information, if I may, Where do you want to be, and when do you want to be there?
Exactly; most people only look at "cash flow" or monthly payment, very rarely does anyone examine the total cost. "Putting more money in your pocket now" may only take more out down the road. Be careful, and always ask what is the total cost of this program.
As Bizwiz said, if you need financial information, many free resources are available. If you can pay on the debt and want to improve your postiton, you need to learn to live below your means. This may mean moving to an older, smaller car, moving to a less expensive apartment or home, canceling your cable, eating at home instead of eating out, or even getting another job to help pay off the bills.
