Why are there so many non profit debt counseling service providers? The answer is really pretty simple. Issuing credit cards is a profitable business, but to make money, the issuers need to get lots of cards out there. The issuers know that a certain percentage of the cards they issue will accumulate balances that will become increasingly painful, and which some of the cardholders will ultimately not be able to repay. Success in the business credit card issuance business depends on getting consumers to accept credit cards with interest rates high enough to offset the default rate the issuers know will occur. You can’t blame the issuers for glossing over the very real damage credit cards have done to millions of families. Their mission is to make money for their shareholders. It sounds a little predatory when you put it that way, but nobody is holding a gun to the head of the consumers who accept those cards – at least not at first.
If you have been watching your total credit card debt creeping steadily upward, you are certainly not alone. If you want your family to be one of the families that avoids a serious debt crisis, then a key first step may be a visit to a non-profit debt counseling service.
Why Start With A Non-Profit Debt Counseling Service?
A good non-profit debt counseling service is in business to help you understand your financial situation and find the pathway to recovery that is best for you. Their fees are typically modest, and the advice they give is not biased by their need to make money from the services they recommend. Most nonprofit debt counseling services meet accreditation standards set by national organizations such as the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA), both of which set training standards for professional credit counselors, and both of which audit member organizations for compliance with accreditation standards.
Preparing For Your First Debt Counseling Session
To get the fullest possible advantage from nonprofit debt counseling there are a few steps you should take before your first session:
- Order a free copy of your credit report from FICO or one of the other national credit rating organizations;
- Collect of all of your debt information including credit card statements, student loan contracts, mortgage documents, and other installment loan contracts such as auto loans;
- On a single sheet of paper, summarize the outstanding balances, interest rates, minimum required payments, and other pertinent information from each debt;
- Next, make a list of your fixed and variable monthly expenses. Fixed expenses include items such as your cable bill, your Internet service, your rent, health club memberships, etc. Variable expenses include estimates of typical monthly grocery costs, utility bills, clothing costs, and discretionary expenses such as dining out and entertainment. Add additional expenses that are not paid monthly but which occur on a regular basis year after year such as tuition payments, taxes, expenses related to vacations, etc.
- Generate a reasonable and conservative estimate of the income you expect of the next 12 months.
What Your Debt Counselor Can Do For You
Arriving at your first debt counseling session with the documents described above will help you and your debt counselor determine what portion of your expected income can reasonably be allocated to debt repayment – after meeting monthly expenses, and setting aside at least some money for savings. Depending on the size of your total debt burden and the amount that can reasonably be allocated each month for debt repayment, your debt counselor will be able to present a range of recovery options that are realistically available to you. These options may include
- Temporarily reducing monthly discretionary expenses to free additional dollars to pay down especially costly high interest debts;
- Contacting your creditors to request lowering of interest rates or extension of loan payback terms to help you (eventually) pay them in full;
- Seeking a debt consolidation loan under terms and conditions that actually improve your chances of repaying your debts in full;
- Enrolling in a formal Debt Management Program offered by a specialized company that accepts a single payment from you, and uses an assured payment of a portion of your single payment as leverage to obtain partial debt forgiveness or improved payment terms from each creditor.
Stay in contact with your non-profit debt counseling service. Disciplined adherence to a well designed debt reduction plan for six months may make enough of a difference in your circumstances that revisions to the initial plan could save you significant money. Similarly, if the initial plan is not producing the anticipated results, it may be time to try an alternative approach. In either case, the cost of staying in touch with your debt counselor is small compared to the potential savings.