Debt Counseling

Koyaanisqatsi · July 4, 2003, 23:58

Need some advice from people who know more about financial institutions than I do (read: anybody).

How do debt/credit counsling companies work? Ads always say that they're "non-profit" organizations, which I somehow don't buy, and the tiny bit of research I've done so far seems to support my guess. I understand that they get money from both customers and the credit cards/banks they deal with, but admitting this model, can they actually be useful if you're badly in debt?

I used to pay off my credit cards every month, but after I got really sick a few years ago I was unable to do that, and the situation has only gone downhill from there. Now I'm working 50+ hours a week, and still am going to have a lot of problems financially come fall when classes start again...particularly since my fiancee and I are going to have to figure out how to do some large purchases in the near future (like a car for her--you can't get by in the winter around here without one) and a wedding (as soon as fiscally possible, which isn't soon enough, but...). I don't want to just call it a day and file chapter 11, for several reasons. I don't want to leave school, if for no other reason than that would just make the money situation worse in the long run when I couldn't get as good a job down the road. I'm not sure what to do, and I was just wondering if anybody knows anything about these places...like, perhaps, if I should avoid them like the plague or something pertinent like that.

Thanks...

Bugs ****ing Bunny · July 5, 2003, 02:55

Avoid them like the plague. It's debt consolidation, and you'll pay them interest on the debt and may also pay for the advice. In they end it will cost you more.

Deal directly with the banks or credit card companies and negotiate a repayment plan with them. You may get a reduced rate or an extended payment period if they take a pragmatic stance. It'll be more work for you but it will cost you less.

If you own property, you can get lower interest by securing a consolidation loan on the property or as part of a mortgage.

When dealing with the credit companies, demonstrate a willingness to repay and control over your finances. Provide details of all your income/expenditure and info on any good future prospects. Many organisations will treat college students more favourably than Joe Public in view of future marketing opportunities.

I used to work in debt counselling for a bank, and what you got there is exactly the sort of advice I gave. Good luck.

C0ckney · July 5, 2003, 04:07

consolidation loans have been described to me by many people as like droping your pants in front of the bank manager and telling him him to lube up :/

then again i'm no expert.

Koyaanisqatsi · July 5, 2003, 14:17

Ok. I figured, but thought I'd check anyways.

Thanks.

Provost Harrison · July 5, 2003, 14:38

You can't say any more than Laz has, debt consolidation firms profiteer of the lazy/scared and some of the interest rates I have seen from them are staggering

Koyaanisqatsi · July 5, 2003, 14:43

Couldn't be much worse than the rate the credit cards went to when I was sick.

At least they're both down to zero for a while, though. I'm just worried about what happens when the payment plan ends.....

Provost Harrison · July 5, 2003, 14:48

They are bastards if you give them a chance...

Drogue · July 5, 2003, 15:11

Debt consiliation can have extortionate rates, however that is not the same as debt councilling companies. These, such as the CCCS (Credit Consumer Councelling Service IIRC) debate with banks themselves, and can freeze interest and lower payments (I work in collections at a building society, and we do this many times a day, when it is needed and they ask). Many are non-profit, although they charge to take into account your finances, however the CCCS do not. I would strongly advise against using a consilliation load, but some services that will talk to banks and load companies for you can be very beneficial. They will spread what you can afford to pay among the creditors. If you are in arrears (ie. you owe money that is above the amount you should do, and you cannot pay it back) then I would suggest contacting some sort of service. I am not sure of any good ones in the US, or even if it works the same. In the UK, simply go to the Citizens' Advice Bureau, however I'm not sure if anything like that exists over there.

Hope this helps. I am afraid I don't know much about the US system for banking and collections so I'm not sure how relevant this is, but this would be what I would do over here.

Zkribbler · July 5, 2003, 15:19

Quote:

Originally posted by dv8ed
Couldn't be much worse than the rate the credit cards went to when I was sick.

That's the key. Who cares if they're charging 12%/year when the prime is --what, around 3%? -- if the credit card company is charging 15%-18%-21% or more?? Watch out for hidden "fees" though.

Don't let the term "non-profit" fool you. That doesn't mean no profits; it just means there's no shareholders to give the profits to.

It works something like this. Let's say to company has five officers and nets $1,000,000 per year. They decide not to sink any of the money back into building up the firm but instead they declare each of them gets a salary of $200,000 for that year. After that, gee, there's no profits.

Koyaanisqatsi · July 6, 2003, 12:31

Quote:

Originally posted by Drogue
Debt consiliation can have extortionate rates, however that is not the same as debt councilling companies.

So, wait, which were Laz and C0ckney talking about then?

Bugs ****ing Bunny · July 6, 2003, 13:36

Debt counselling = giving one advice about debt.

Debt consolidation = turning lots of little debts into one big debt.

*End Is Forever* · July 6, 2003, 21:54

Quote:

Debt consolidation = turning lots of little debts into one big debt.

Well, normally turning lots of big debts into one gigantic one, but there you go...

Koyaanisqatsi · July 6, 2003, 22:42

Quote:

Originally posted by Lazarus and the Gimp
Debt counselling = giving one advice about debt.

Debt consolidation = turning lots of little debts into one big debt.

Well, yes, I know, but I was asking about the ads for places like CCCS that Drogue mentioned...you weren't talking about them?