By Joseph Nykoluk:

Part 1 – What Will A Good Credit Counselor Do For You

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One good thing that you could do is go to various news sites and key in a search term like “credit counselor” or “credit counseling” and see what comes up. One thing for sure is that what you read is pretty current, sometimes only hours old. That’s what I have done. Recently there is been criticism of how some credit counselors act when trying to win you over to sign up with them.

Some of the criticism surrounded issues as to their effectiveness as well as to their legality. On the other hand you will also find those honored for leadership in Consumer Credit Counseling Services.

But, as mentioned criticism still abounds, so the Federal Trade Commission filed lawsuits against several credit counselling agencies, and they continue to urge caution to consumers when it comes to choosing a credit counselling agency.

The FTC has received over 8,000 complaints from consumers about shady credit counselors. Many of those complaints concern high or hidden fees along with the inability to opt out of so-called “voluntary” contributions. The Better Business Bureau also reports high complaint levels about credit counselling.

The FTC and Better Business Bureaus are not the only ones. Credit counseling services also touched the nerves of The Internal Revenue Service (IRS). The have denied tax-exempt status of many credit counseling agencies. Although only roughly thirty agencies were involved, they still account for more than half of the industry’s revenue.

The lobby against credit counselors arises from the belief by the collection industry that the not-for-profit status of the credit counselors gives them an unfair financial and market advantage over them. The IRS apparently agrees.

Although it has yet to be proven, it seems that the tax exempt revocations revolve around whether or not a tax exempt credit counselor really performed as they were supposed to. Instead it is speculated that they devoted their attention to their own debt management plan customers in a “collection practice“.

But, as with everything else on this planet there is The Good, The Bad, and The Ugly about Credit Counseling Services. There are some very good credit counselors that have great reputations while there are also some that love to take advantage of consumers. Where some agencies charge excessive fees and provide poor service, others are just plain frauds.

The Federal Trade Commission really had enough of this and have cracked down on con artists who target jobless Americans. If you are looking for fantastic information go check out The National Foundation for Credit Counseling – (NFCC). Being a member of the NFCC can go a long way to eliminating abuses by non-member credit counseling companies.

Debt Consolidation Companies

Although similar to credit counselors, debt consolidation companies negotiate with your creditors to try and get a lower pay-off amount for your debts and then try and secure a loan on your behalf. If successful, this will allow you make a single payment rather than several payments. The big difference with debt consolidators is that they really only do one thing – they will charge you a fee to get your creditors to accept a lower payment and then get a loan for you to pay them off.

But if you think about it, you can do this yourself. All you need to do is a little bit of work by calling your creditors and negotiate a pay-off balance yourself. When you go to your bank to get your loan, you tell them that the loan is a debt consolidation loan. Even if your credit is less than perfect, many banks have debt consolidation loans available to most people.

(NOTE: If you’re a private student attending university or college you may want to check out www.PrivateStudentConsolidationLoan.org)

When deciding on whether you want to see a credit counseling company or or a debt consolidation company, all you need to do is research all the advantages and disadvantages of each and how they relate to you. Once this is in place, narrow your research further by determining their reputation. Do some online research and go to the NFCC and see if they are a member of the National Foundation for Credit Counseling. Above all make sure they have a good reputation.

Yes, debt consolidation and credit counseling services can help you get rid of your debt but you need to be cautious and DO YOUR HOMEWORK or you could end up with more problems than just too much debt.

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Filed under: Debt-Credit-Counseling

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