 Q. What is the cost of your counseling and budget consultation?
A. Usually counseling session and budget consultation is free. Most counselors will provide you with a free analysis to help assess your financial situation and determine your best options. However, if you decide to sign up for a service, your cost would depend on certain factors such as your debt level, number of accounts opened as well as secured vs. non secured debt load.
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Q. Do Credit Counseling Agencies loan money?
A. No. They are not a lending institution. Credit counselors work with your creditors on your behalf to establish an affordable new payment arrangement, which may include benefits such as a reduced interest rate and no late or over-limit fees, allowing you to pay off your debt more quickly. Credit counselors collect one monthly payment from you and disburse your payments to your respective creditors. |
Q. What is the cost of the Debt Management Program?
A. There is a one-time fee that averages between $30 and $150 for enrollment. There is also a monthly maintenance fee per account. For example if this fee is $5 per account and you have 10 credit cards accounts in counseling, your monthly cost would be $50($5 X 10). Fees may be waived or discounted depending on your state’s regulations, or if you are a full-time student, veteran, active military or senior citizen (age 62 or older). |
Q. What kinds of debt can be put in a Debt Management/Credit Counseling Program?
A. You can put any of your unsecured debts such as credit cards, department store cards, medical bills, signature loans, and many collection accounts in debt management program. You can also seek help with your secured debt. |
Q. What are the benefits of a Debt Management/Credit Counseling Program?
A. Debt Management Programs are focused on assisting you in regaining control of your finances, creating a household budget, and consolidating your debt into one monthly payment. They work with creditors to arrange for the benefits that creditors offer through participation in a debt management plan. Most creditors will provide benefits, which may include lower interest rates, stopping late and over-limit fees, and re-aging delinquent accounts to reflect a current status. |
Q. What will my new interest rates be?
A. Program interest rates are pre-determined by the individual creditors that you have. For example if you have a credit card account with default interest rate of 29.99%, you may get a rate as low as 10 - 12% with the help of a credit counseling agency.
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Q. When will my interest rates start to go down?
A. Many creditors will lower the interest rate immediately upon acceptance of a Debt Management proposal. Others may wait for three consecutive program payments to post on your account before lowering the interest rate. In any case, you should start to see your lower interest rates with three to six months of enrolling in a program.
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Q. What does re-aging an account mean?
A. Once your debt management proposal is accepted by the creditor and generally after making three consecutive payments, many creditors will re-age a delinquent account to show as current on your credit report. Federal law prohibits creditors from re-aging an account more than once in a five-year period. This process should also help you improve your credit score.
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Q. How do I get started in a credit counseling program?
A. The fastest way to get started is to contact one of the reputable credit counseling agencies by either phone or via internet. Counselors are usually available to assist you Monday through Friday. You can also fill out a free online application that allows you to complete the process at your own pace, before speaking directly with a counselor.
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Q. How long will it take to complete the program?
A. A Debt Management Program is designed to complete in approximately 4-5 years based on the minimum required program payments. However the length of the program will be determined by the total amount of your debt, your specific creditors, and whether you can send extra funds as you become more financially stable.
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Q. What happens to my total monthly payment when one of my accounts is paid off?
A. Your total monthly payment will remain the same throughout the life of the program. As one account is paid off, the funds for that creditor plus the maintenance fee will automatically be reallocated in a way that is most beneficial to you, which is generally the account with the highest interest rate.
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Q. Can I still use my credit cards once I’m enrolled in the program?
A. No. All accounts entered in the Debt Management Program will be closed. Closing your existing account is one of the most important elements of credit counseling. AS most people understand, in order to get out of debt and regain financial stability, you must first stop incurring new debt.
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Q. Will my creditors still send me statements?
A. Yes. You will continue to receive monthly statements from your creditors, as usual. The statements will reflect payments made through the Debt Management Program. Please review your monthly statements to make sure you receive accurate benefits from your creditors, as indicated on your credit counseling payment summary sheet.
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Q. Can I make payments on my own, once I join the program?
A. No. It is recommended that once the program begins that all payments be made through the Debt Management Program. Payments made directly to the creditors could be viewed as a termination from our program by the creditor and may result in an increase in the interest rates. If you want to send additional funds, please contact the Disbursement Department at your credit counseling agency. Please remember that they may charge you additional fees to post extra payments.
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Q. How will your program affect my credit or credit score?
A. While you are on the program, some creditors may contact the credit bureaus and put a notation on your report indicating that you’re going through credit counseling. This is a neutral notation that does not affect your credit score, which is what most lenders use to determine creditworthiness. How individual creditors view this notation varies. The notation is usually removed when you complete or terminate the program and, if it is not, you may contact the credit bureaus to have the inaccurate information removed. We recommend that you review your credit report, upon completion/termination of the program, to ensure that all information is being accurately reported. |
Q. Is my information kept confidential?
A. Yes. A reputable credit counseling agency should have a strict privacy policy to protect and safeguard client information. If you’re not sure about it, please request them to mail you a copy of their privacy policy. Credit counseling agencies are also required to comply with federal regulations to guard your nonpublic personal information and will not disclose information to anyone except you or those persons authorized by you. |
Q. How does Credit counseling Agency gets its funds to operate?
A. Credit counseling agencies receive financial support through voluntary fair share and grant contributions from creditors who participate in their Debt Management program. They also charge you a small enrollment as well as monthly enrollment fee to raise funds. A good credit counseling agency must be willing to work with creditors who are willing to accept their payments and offer benefits to the clients, regardless of whether or not the creditor provides financial support to the credit agency.
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Q. How do I know if a creditor accepts the Debt Management Proposal?
A. Many creditors will send a letter informing you of the acceptance of a debt management proposal. Another way is to check your credit card statements. Lower interest rates and suspension of late fees indicate the creditors’ acceptance of the debt management proposal. You may also check the status of your accounts online with the credit counseling agency.
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Q. How do I add an account to the program?
A. All unsecured accounts should be included in the program in order for you to receive the full benefits of the program. You can add an account by sending a copy of your most recent creditor statement to your credit counseling agency.
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Q. What happens if one of my credit cards is sold or transferred to another credit card company?
A. If a creditor sells your account to another company, they must notify you in writing. Should you receive notification of this, you must contact your credit counseling agency to make the necessary changes to ensure the new creditor is informed of your participation in the Debt Management Program and that your payment is being sent to the correct place. |
Q. What if a creditor doesn’t agree to participate?
A. Unfortunately it is the decision of a creditor whether or not to accept a debt management proposal. If the creditor will not accept a proposal, they may accept the full standard monthly payment through our program, but offer no benefits. If a creditor refuses to accept your payments through a debt management company, then that individual account must be removed. You will then need to send your regular monthly payments directly to the creditor.
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Q. How will a creditor know I joined the Debt Management Program?
A. Your Credit Counseling agency will send debt management proposals to your creditors, just prior to sending your first payment. The proposal stands as official notification to your creditors that you have sought the assistance of a credit counseling agency.
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Please note that Fiscalwealth.com does not offer any type of financial advice, including credit advice or debt consolidation advice. This page merely explains some of the background of 'credit counseling', and we expect you to use utmost caution when considering Credit Counselling or Debt Management services.
