Choosing the Credit Counseling Program
Sometimes it’s hard to feel the moment when it’s the right time to opt for some credit counseling program. For the citizens of any USA state, will it be Houston or Massachusetts,it’s easy to define the right time by considering the following statements:
- You experience troubles in making monthly payments and would prefer to have some plan;
- The balance on most of your accounts is awfully close to the stated credit limit;
- You have no room in your budget, every time you earn some money you have to spend them on paying off your debts;
- You can only do minimal payments, otherwise you will not be able to pay all the incoming bills;
- Your interest rates and fees are growing;
- You can’t catch up with your bills due to variety of late payments.
If you answered “yes” at least three times, than it’s the right moment to consider credit counseling program already popular in New York. Here professional credit counselors will help you to get a hold of your finances and deal with your credits.
How did I end up with the overwhelming debt?
Most people consider the debtor being the source of his own financial trouble. “Do not take credits you’re not able to pay off”, people say. Still in some cases it’s the bank that brings the debtor to the very edge of financial wellbeing.
High fees and charges, poor standards in the field of underwriting, even the unfair practices – all of this can work against the most sincere debtor. In order to have the credit patchwork fixed, turn to an agency and choose the right credit counseling program. Use the experience of California citizens, where this program is widely used.
How do banks deal with credit bubble?
A lot of banks try to play the role of credit counseling agencies by offering a lot of options for troubled debtors. However most of them have really different approach to the same situations, for example massive credit card insurance.
At the time of credit boom banks were offering credit to just anyone. Still the offered credit limits were not even close to the financial amounts people were really able to pay (these ones are now calculated through special computer algorithm and are known as FICO score).
Usually the bank starts its work with the troubled client after the first payment is missing. Here the interests of both lender and debtor meet since they both are seeking the way to solve the problem in a way suitable for both of them.
How to approach DIY credit counseling program:
- Discuss the situation with your creditor
Do not think that the automatic answer you are going to get is “no” only because the creditor got you buried under your own debt by charges and high interest rates. Remember, the bank is interested in you paying off the debt much more then in you filing bankruptcy.
- Find the right person
Even if the first contact isn’t positive, this might only mean that the person you talked to is not empowered to solve your situation. Discuss the possible credit counseling program with the person in charge; this is how Texas people do to get closer to debt relief.
- Do not lose your time
Try to contact your bank immediately after you missed a payment, be the first one to make a call. Remember, the bank will see your late payment really soon and call you anyway. Be ready for a lot of calls since most creditors believe you will more likely pay after getting tons of reminds from the bank.
- All creditors are different
Some lenders might offer you lower payment arrangements after several weeks of late payments. Others might just go on forcing you to pay off the whole debt.
If your bank doesn’t want to cooperate, feel free to turn to the credit counseling agency for their DMP product. The offered interest rate reduction plan might help you. Compare all your options and choose the best one in order to pay minimal charge.
Types of hardship plans
The type of the offered hardship plan depends on your financial ability to pay the debt. There are two main options:
Temporary hardship plan
It lasts for the half-year or the whole year with your monthly payment being reduced to 2% of obtained balance and interest rate being no higher than 9%.
Long term hardship program
Your account will be closed in order to freeze the current balance. You will get the opportunity to pay off the debt during the next 5 years with fixed monthly payment about 2,5 % of the balance you obtain.
What you need to know about hardship plans
By establishing the payment plan you show your creditor you’re ready to pay as soon as the debt gets not so overwhelming. Be patient and answer the qualifying questions to let the creditor know if you’re able to follow the offered plan. Do not hide your monthly income, mortgage or rent and your regular payments. If you try to look poor enough to get the better repayment conditions you might not be offered the payment plan at all. The usual plan is formed for the next 5 years with yearly recommitment.
Hardship plan benefits
- At some point your account will appear to be behind the point of re-aging;
- If your account is re-aged, you will have from 1 to 3 months removed from the credit report;
- Establishing the plan before 5th missed payment you will not have your account charged off.
- Hardship plan drawbacks
- You might not be offered the repayment plan at all;
- Your account might get limited or closed, so look for other options before contacting your creditors.