Eva
“Dear Steve,
My husband and I just bought a home and besides the mortgage, we are in debt for $26,000.
I called up my credit card companies and they said they aren’t offering lower rates to customers now.
I went to CCCS website and they say lowering customers rates is one of their ways they can help out. If I can’t get the credit card companies to lower my interest rates, how can CCCS? I have also read some negative things about CCCS and other agenices like theirs.
What can I do to protect my family from not being able to make ends meet?
Eva”
Dear Eva,
Congratulations on the new house. I got you this answer for a house warming gift.
CCCS or any credit counseling group offers what is called a Debt Management Plan or Debt Management Program, DMP, as a way to consolidate your debts. Many people think it is a loan, it’s not. Others think it is an easy way out of debt, not necessarily.
Credit counselors are recognized by creditors to offer special terms that might involve lowering your interest rates. These terms are generally reserved for people that are having financial problems, not as a way to just lower your monthly payments.
Entering into a credit counseling program can negatively impact your credit score since it is an indication that you are having financial problems. And once your creditors see or learn about your participation, your interest rates and/or monthly minimum payments could go up.
A credit counseling program is paid for primarily by the creditor that pays the credit counseling group a percentage of money they collect from you and return to the creditor. I know, it sounds dangerously close to the services provided by a debt collection agency.
Now, there are times to use a debt management program, especially if you are having a tough time getting by each month and if you don’t get into a debt management program then you will fall behind or go bankrupt.
Nobody can give you specific advice about what terms will be offered to you in the debt management or credit counseling program until you contact the credit counseling group and ask about what terms your specific creditors typically offer.
Since the terms and interest rate reductions are very important to you, I think you should contact this group and see what the current terms are. When you contact them, also be sure to ask what your creditors will do with your minimum payment when you are in the debt management plan and ask for an estimate of what your monthly payment would be.
There is no reason for you to enroll or signup for a debt management plan to learn this information and while CCCS is one group that offers debt management plans, they are not the only one.
Finally, a debt management plan is primarily dictated by the terms the creditors offer through the credit counseling agency and not by the credit counseling agency negotiating on your behalf. There is no negotiation.
Protecting your family from not making ends meet has less to do with CCCS than it does with utilizing your money so that your most important bills are paid first. This means that your mortgage, car payment, utilities, food, etc. should be paid before you send any money towards your credit card debts. In fact, I think you should also be putting at least $100 a month into a savings account as part of your most important obligations.
If you were to fall behind on your bills and creditors closed your accounts, you’d need the savings account money to help you in an emergency. Its logical and makes sense.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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