Consumer credit counseling agencies act as an intermediary between you and your creditors in order to establish a set, lower monthly payment plan that your creditors agree to accept, and that you can afford. The method used to lower your payments is simple enough to explain; your banks agree to lower your interest rates, and consolidate all of your payments into a single payment.
Credit Counseling offers one of the most common and legitimate ways to get your credit card bills reduced and under control with a single consolidated monthly payment.
There are benefits and drawbacks to working with a credit counseling service. And, there are qualifications to meet in order to be enrolled in their Debt Management Plan (DMP). There are also situations where you would simply not be able to financially commit to this type of program for debt relief.
Is a counseling agency right for you?
It depends. You will need to speak with a license counselor to get a direct lower payment quote. You can reach one now at 888-317-8770. Here are some immediate questions you can ask yourself that will help you get a feel for the affordability of a consolidated payment plan:
- Assuming you’re paying an average of 16% or higher interest rates across your combined unsecured debts, would getting these rates cut in half allow you to continue making your credit card payments while meeting all other monthly bills and obligations?
- If your interest rates were cut on your major bank issued credit cards, and your payments lowered, would the new lower monthly payments allow you to save money each month in order to start building savings that you can use in an emergency instead of a credit card?
- Do you have a dependable income and the discipline to stick to your debt consolidation payment plan?
Answering the questions above should help you readily identify whether a credit counseling service will work for you.
How does credit counseling lower monthly payments?
You contact a credit counseling service, typically over the phone, and walk through a simple budget analysis with a certified counselor. This will consist of questions about your debts, regular monthly bills, and your income. The counseling agency will have some set criteria they use that will identify which of your accounts can be accepted into the debt management (DMP) plans they offer. The credit counselor uses their automated system to contact the credit card companies you owe, putting forward a repayment plan. Most of this can be handled in one call to the counseling agency if you are prepared with an outline of your income, and your monthly bills.
Most of the debt relief you achieve through a credit counseling service will come from lowering your credit card bills, store credit cards, gas cards and medical bills. All credit counseling services have a formula that’s used to qualify your debts for lower monthly payments. This formula consists of:
- Your credit card balances.
- Who your accounts are with and what that bank or lenders policies are for lowering your payments through debt management plans offered through a credit counseling service.
- What money you have left in your monthly budget after your typical monthly expenses are calculated (this is often referred to as discretionary income).
- Whether you would have too much money left after all of your bills are paid – this sounds odd, I know, but banks do not want to limit their profit from credit card interest by lowering the rate for you if your income shows you can afford the higher interest rate you pay now.
The national average for lower monthly payments through a credit counseling service is roughly 2% of your account balances that are enrolled in the debt management plan. You can estimate what your lower payments would look like – prior to calling a counselor – using the example given below.
After your normal household bills are paid each month, do you have enough left in your budget to make a monthly payment of 2% of your combined unsecured credit card balances? If so, you are a good candidate for credit counseling.
Who is the best candidate to work with a counseling agency? These debt management plans are most effective with helping you pay back debts when you are:
- Current with your creditors, but you’re struggling to keep up with minimum monthly payments.
- You are behind with payments to creditors, but only by a few months.
Credit counseling is not ideal when you are already dealing with third party debt collectors and debt buyers. Many collection agencies and debt purchasers do participate in credit counseling repayment plans. But working with a debt management company when some, or all, of your accounts are in collections may not be a good idea. You can learn about other methods to deal with collection accounts through our above menu and navigation, and by using the search box located in our sidebar.
How can I benefit from credit counseling?
Some immediate benefits to working with a credit counseling company for someone struggling with credit card bills could include:
- Creditors often waive late payment penalty fees.
- Banks may offer an interest rate reduction.
- Your monthly minimum monthly payment may be reduced.
- You will no longer make direct individual monthly payments to the creditors that are part of your debt management program. You will make one fixed and easy payment to the credit counseling agency. The credit counseling service then breaks out individual payments to your creditors.
Your monthly payment is set up as an auto-draft from your personal bank account for the same day each month. You will typically continue to get your normal monthly credit card statements in the mail. This allows you to verify the payments are being made on time and to see that the bank is applying your payments according to the plan you set up with the credit counseling company.
How long do debt management plans last?
A repayment plan using credit counseling to consolidate your debt will typically last 4 to 5 years. The DMP cannot exceed 60 months by design. Your fixed payment is due on the same day each month for the duration of the plan. You cannot miss a payment while paying your debts through this form of consolidation. If you do not make an on-time payment, you risk losing the reduced monthly payment benefit.
You do have the option of paying more towards your debts on the plan, which would help you finish early. You can also withdraw from the plan at any time and take over payments to your creditors, but you may lose the lower interest rates.
If you’re struggling to make your monthly credit card bills due to higher interest rates, but have a dependable income, it is a good idea to talk with a credit counselor and get the information you need to evaluate what benefits you can gain from working with one. Using a counseling service to budget, consolidate, and repay bills can get you out of debt faster than making your current minimum payments on your own.
How much do credit counseling agencies cost?
There are limits to the fees you can be charged by a credit counseling agency when they are assisting you with a debt management plan. Those limits are set at the state level. The fee is typically going to be less than $50.00 each month. Nonprofit credit counseling services will waive the monthly fees in some instances if you fit a certain criteria.
What do you get in return for the fees you pay the agency?
- Your creditors agree to the lower monthly payments that you may not have been able to get on your own.
- This agreement means you don’t get calls from debt collectors.
- You now have a set payment amount and a set time frame to eliminate your debts that are part of the credit counseling program. You will be out of debt in 60 months or less if you stick to the plan.
- If you have missed a payment or three already, many creditors agree to re-age your account. This can help the account show current on your credit reports moving forward.
There are many scenarios where the credit counselor will be able to consolidate your credit cards and get lower monthly payments than you could on your own without the consolidation. The more accounts you have to enroll, the more likely the bill consolidation plan pays for itself.
Does consumer credit counseling affect my credit score?
When you enroll in a debt management repayment plan with a credit counselor, your accounts will be permanently closed by the credit grantor. Closing accounts can have a slight impact on your credit score (dropping only a couple points). If you want to be proactive you can close the accounts yourself before you enroll with a credit counseling company.
The accounts that you enroll in the credit counseling plan may appear on your credit report as being enrolled in a managed repayment plan. This does not impact your credit score, but it can affect the way your credit report is viewed by people who look at it in order to lend to you.
When starting out on the plan, it can be difficult to get new credit, and you are encouraged to not open any new credit without speaking to your credit counselor first. As you progress with your credit counseling payments over the course of a year or more, you may be able to qualify for a car loan, student loans – even refinance your mortgage. New unsecured credit card accounts while you are working with consumer credit counseling will be hard to come by. This is not necessarily a bad thing….
It is very simple to establish new credit upon completion of your debt management plan.
Can I estimate my lower monthly payments?
As mentioned earlier, the monthly payment relief you get from working with a counseling agency comes from interest rate reductions, and the minimum payment concessions that are prearranged with your creditors. Each bank has its own set of criteria for measuring what type of reduction in interest and payment you will get through your enrollment in a DMP. Even though there are differences in calculations from bank to bank, we can still apply some national averages and come up with a rough estimate of what your monthly DMP payment might look like.
Example:
You have $22,000.00 in total unsecured debts across 4 credit cards and one signature loan with a finance company.
Using an average of 2.1% of your total 22k debt as your new monthly payment for these 5 accounts, you would pay a fixed $462.00 every month until your debts are paid off in full.
You can quickly add up all of your unsecured (credit cards, store cards, gas cards, etc.), and use the above 2.1% calculation to see how much you could save each month by working with a credit counseling agency. If the amount you calculate is something within your budget, you would want to connect with a credit counselor and go through a full consult in order to get an exact monthly payment quote. In many different types of situations, your payment reduction could be lower or slightly higher than the example of 2.1% given.
Getting all the details.
With so many credit counseling agencies nationwide, finding out if you qualify for a debt management plan, and understanding how all of the details apply to you, is a matter of picking up the phone. The only way to get an accurate monthly payment quote is by speaking with a certified counselor at one of the many agencies you have to choose from. If you would like to learn more about this debt relief option right now, you can call 888-317-8770 to speak with a licensed credit counselor.
If you have any questions, comments, or concerns relating to a credit counseling service or how a debt management plan would work for you, post a comment below for feedback.
Continue on with part 2 of counseling: Top Drawbacks to Debt Management Plans
Hello,
I have a few questions. We are currently with a Debt consolidation company. I lost my job last month and my wife just found out we’re expecting our first child. She is high risk and my be put on bed rest for the duration of her pregnancy. At this point we can neither afford to pay the Debt Consolidation company or make minimum payments on the Credit Cards. We have already received notice from some companies advising they are exiting the program because we missed one month of payments currently. Our house is paid off can they put a lien against our home and force us to sell it under Flordia State Laws? I read that we maybe covered under the Homestead? Also I claim HOH which I also heard hey could not garnish our wages per FL law? Any info would be amazing as obviously we don’t want to lose our home!!! Thank you so much!
It sounds like you are working with a nonprofit agency to make the monthly payments. If you stop the DMP you are on, and make no payments, you have time to raise money to settle your credit card bills, and may also want to consider chapter 7 bankruptcy.
List your credit card banks and balances. I can help you estimate what you are up against and your risk profile for being sued.
You are right about the head of household and homestead exemptions. But they are not a plan by themselves. Not when judgments can hold up your families financial goals for so long.
I have high credit balances and it is difficult for me to meet my payments but I pay on time if I wanted to pay out some of my credit cards would my credit card companies cut down on the balances in exchange for a pay out?
You are describing settling your debt for less. Virtually all credit card companies will take less than the balance owed, but not until you are late with payments. And not just a little late. You typically have to be several months late. And with some creditors, the better opportunities won’t be until they send your account off to collection agencies.
Your credit will take a big hit.
Check out this comparison between settling debt and credit counseling.
Hi Michael,
I am interested in a DMP. Please give me your opinion on if it is advisable.
My total credit card debt across 11 cards is -$69,932
My total monthly income is $2956 from work and $521/month child support
My monthly bills total $1900
Cards are as follows
Amex- minimum payment $48 balance $ 2018 Interest rate 17.24% current
BOA- $64 $2891 14.49% current
BOA- $200 $7386 20.24% late 2 weeks
Capital One $303 $10, 196 23.15% current
Chase- $118 $4419 18.49% current
Credit Union $59 $2937 9.99% current
Discover- $185 $9278 14.99% late 3 weeks
Ebates – $243 $8052 24.99% late 10 days
PENFED- $175 $8793 11.99% late 20 days
USAA- $283 $10669 15.5% late 10 days
Wellsfargo $82 $3293 17.15% current
Thank you for your help.
Call 800-939-8357 ext 1 and go through a free consult. At the end of that you will get an exact quote of what your lower monthly payment would be on all of those cards. I am estimating it to be around $1400.
Let me know your thoughts after you complete the consult.
I am trying to find out if you all can work with lending club and avant I am finding most places can’t.
Are you looking to consolidate Avant and Lending Club into a lower monthly payment plan through a credit counselor, or are you looking to settle the balance for less?
Hi, I was wondering what your advice would be for my situation. My total credit card debt is currently $30,963.00. Combined minimum monthly payments is $912. I’ve missed 3 consecutive payments on my Chase account but the other cards I am current on. My take home pay is $1834 a month. Monthly rent is $600, utilities $65, phone bill $38, gas $160, food $150, auto insurance $59. How much would a monthly payment be if I enrolled in a debt management plan? Would I be eligible to file for bankruptcy with this amount of debt considering my income level? Should I try to negotiate a settlement with Chase? If you could please let me know your recommendations for my case I would be grateful. The individual card accounts are as follows:
Chase $10,414 min pymt $384
US Bank $4989 min pymt $144
Citibank $4290 min $97
Bank of Amer $5895 min pymt $111
Amer Express $991 min pymt $35
Discover $1507 min pymt $38
PNC $1966 min pymt $56
PNC credit line $911 min pymt $47
If you work through a credit counseling agency (CCCS) I estimate your monthly payment would be about $650. If your income is stable you should call my hot line and talk to a counselor so you can get an exact to the penny quote. My estimate is based on an average, where the counselor is going to be accessing a system that is tied into to all of your creditors. The call is free at 800-939-8357, press 1 when you hear my voice. That will connect you to an accredited CCCS.
It is difficult to make a recommendation with the little information I have so far. There are reasons to avoid chapter 7, and reasons I could discover why you should jump at filing. You probably pass the means test if you are single and yours is the only household income to consider.
I recommend you go through a process of elimination to determine what your next steps will be. Call and talk to a CCCS company and get a monthly payment quote. Then talk to a bankruptcy attorney about chapter 7. If you want to compare what settling will look like with those other options, call the same hotline and press 2 to ring me.
Michael, who should be answering?
Thanks!
Pressing option 1 after you hear my voice connects to MMI for a free counseling session where you can get a quote for how low your monthly payment would be in a DMP.
Pressing 2 leads to me to talk about settling debt and other creative options.
Pressing 3 connects to bankruptcy professionals to learn more about what that would look like.
Pressing 4 goes to a dedicated student loan counselor.
What do you know about ClearChoice counseling?
Thanks!
Clear Choice Credit does not appear to be a nonprofit credit counseling agency. If you meant to say Clear Point, they are like MMI and about 100 other credit counseling agencies that do the same thing nationally. They all are heavily regulated and offer the same thing for the most part.
Hello Michael, I read some of your posts and found your answers very honest and clear. So I wanted to ask if you thought that a debt management program (through for example consumer credit would be a good option for me). I earn about $130K before taxes and have about $100k in credit card and loan debt. I also have about $390K in student loan debt. I have been paying my debts, but lately (the last year or two) I have been struggling incredibly. I borrowed to consolidate but it never seems to help. I would like to pay and don’t want to get a big hit on my credit score and don’t want to have a 10 year “scarlet letter” on my credit. Do you think that a debt management program would be a good option for me?
PS – my student loans are on an income schedule and since I work for the public sector, they will be forgiven in 4-5 more years of payments.
thank you so much,
Marya
Post a reply with the balances you owe and the interest rate on each account. I can then help you compare the benefits from signing up with a nonprofit credit counseling agency vs using an aggressive debt roll up strategy.
Here you go:
Nordstrom: $2400 (22%)
Chase: $7166 (18.24%)
Chase: $1444 (0% and then 23.24% after October 16)
Discover: $5398 (0% right now, but I am not sure when it will be 25%)
AmExpress: $3818 (20.49%)
Dell: 992 (24.42%)
Crate and Barrell: $600 (22%)
Bloomingdales: $809 (25.49%)
Amazon: $3217 (26.24%)
Citibank: $4359 (16.24%)
BestBuy: $4039 (0 for 2.5 more years)
Paypal: $3394 (not sure I think it’s above 20%)
NIH Federal CU Loan: $16,194 (i think it’s 8%)
LendingClub loan: $14,452 (10.38%)
LendingClub loan: $12,185 (13.25%)
Prosper loan: $6894 (14.97%)
Barclay: $2433 (22%)
TD Bank Loan: about 19000 (5 or 6%)
Thank you very much!
Also my auto lease expires in about 12 months and I would like to lease another vehicle, would this be doable? I would like to keep the car I have right now.
I do think you will benefit a good amount from consolidating those credit cards with a counseling agency. Those interest rates will be dropped by half or more in many cases. The introductory interest rates you are still on with some accounts may have to be handled differently.
Have you gotten an exact consolidated monthly payment quote yet? If not, call the debt relief hotline I have up on the site, 800-939-8357, when you hear my voice press 1. That consult is free and informative. At the end of the process you will get an exact monthly payment amount that will not adjust and allow you to pay off all of those credit card bills in under 60 months.
Can you be more clear about your goals for the car(s)? I read your comment to say you want to purchase the current leased car at the end of the lease and then lease another on top of that next year.
Thank you. I will call tomorrow. The car I would like to return when the lease is up and get another one.
Thanks, I will be in touch!
Hi Michael,
I called the number you listed and it takes me to Money management international. Is this who I should be talking with? Then when I called back there was no answer.
Thanks
Yes, please try the same number and let me know if you have trouble connecting again. I have never had a problem with my toll free hot line service until last week. I may want to switch to a different service.
I am 53 years old and have been working with CCCS for nearly three years and have paid off over $17,000 of $23,000 worth of debt. Since I started with CCCS I have also paid all of my other bills on time. I got married last year and my husband thinks it is time I get a credit card to start rebuilding my credit. I am afraid that I might get turned down if I apply which will hurt my credit. I had 20 years of excellent credit, then lost my job in 2009 during the recession. I lived off of credit cards to pay my bills resulting in huge debt. By 2012 my debt was out of control. I took steps immediately and am back to my usual good consumer ways. What do you think? Should I apply for a credit card? I am getting offers in the mail.) Or should I wait until my credit card debt is completely gone?
It is a good idea to start rebuilding with revolving unsecured accounts as soon as possible after enrolling in a DMP with a CCCS. All of your accounts (though you can sometimes leave one out) get closed when working with CCCS, so you lose that element of your credit history and should look to replace it. One or two accounts is all I would look to get set up.
The problem is that many issuers are not keen on opening accounts for people they can see are still paying on their DMP. You may want to start off with a secured credit card first, like perhaps the Discover account that can later convert to unsecured. After getting a secured card like that, I might look at applying for an unsecured account. Avoid applying for too many if you are turned down.
My husband and I are currently in a debt management program with Incharge. All of our cc accounts have accepted the DMP except for citi bank which has since sent the account to UCB. ( United collections bureau)
My question is should we contact and make payment arrangement with UCB? The account is for about $8000 and we do not have extra to settle. Or does UCB usually work with DMP programs? And should I have Incharge send a DMP proposal to UCB?
If you are certain you cannot raise 30 to 40 percent of your Citi credit card balance in the next several months in order to settle with UCB, Call Incharge and ask about their success with getting United Collections to agree to the debt management plan.
But if you think you have a shot at raising the money to settle, I would not want Incharge sending a debt management proposal to the collection agency.
I came for guidance and answers and I was not disappointed. I am in a similar boat but not as extreme. I had a CC ($10,000) through my Credit Union (American Airlines Federal CU) and after not being able to maintain my monthly payments it was ultimately charged off by the bank. Since developing my credit history I’ve had my share of missed payments (student loans, payments to different credit cards, etc) and collections (medical bills (damn those deductibles), but this was the first (and I hope ONLY) experience with a charge off. I want to do good on this charged off balance because I’ve never had a unsecured debt I didn’t pay off to completion. My question is what kind of long term ramifications would this charge off incur? I’ve been with this credit union which seems like a decade or more. I feel like my Branch Manager doesn’t even see me the same if it comes to credit-related inquiries, like it’s taboo. Also, what is your thoughts on CareOne Credit Counseling services? Would a credit counseling company, like their’s, for example, be able to include the charged off balance with the rest of my potential credit cards for a debt consolidation plan? Thanks in advance.
Care One Credit Counseling stacks up well with all the other companies out there that offer debt management plans. Whether or not Care One will accept your charge off credit card into your consolidation plan is a question you should ask them. And you should be asking yourself if that is the right thing for you to do too. My experience is that there are more instances than not where making monthly payments on a charged off account can do more harm than good to your credit. I just published that linked video a couple weeks ago. I recommend you watch it and use that information when deciding what to do.
If you enroll with Care One, and they do not accept that American Airlines account, you may want to look at negotiating a settlement for the best savings possible, this it,if you can raise the money while still making payments on your credit counseling plan.
Let me know what you think after watching the video back, and after you talk to a counselor at Care One.
I have a Best Buy card (CitiBank) and it is in collections. The collection agency is United Recovery Systems LP,The amount I owe is 4,198.70. I am five months behind on payments. I have tried contacting credit counseling agencies and they want too much for monthly payments. I have one job and I do not make a lot at 9.63 an hour. Best Buy says my account is now in their special recovery collections dept and I am afraid to call them. I just want to pay off the debt by making small monthly payments of between $40 or $50 a month. I do not make a large check and there is not a lot left over. I live check to check. I do not own my own home or car. I live with my boyfriends parents and cannot afford to pay rent but I pay groceries and gas for me and my boyfriend and another credit card bill of $41 a month and his cell phone of $33 a month, he is unemployed and looking for work. How can I resolve this issue at an amount I can afford when everyone wants more than I have to give. What happens if I end up in court, If I am behind on payments and have a job. Can they take my salary away to pay the debt I owe or put me in jail? Is there a way I can contact Best Buy and get them to agree to $40 or $50 a month so I can just pay off what I owe over time? Do you know of any credit counseling agencies that would be willing to work with me for such low monthly payments? They all seem to assume I should have so much money left at the end of the month and I don’t.
It generally does not make sense for you to enroll in a credit counseling program when your main issue is a charged off credit card being collected by an outside third party agency like United Recovery. The only other account you have that would benefit from working with a credit counselor is the 41 dollar a month credit card. What is your interest rate on that account?
URS is a contingency debt collection agency. They will not sue you. Citibank and other creditors send accounts to them in order to collect by calling and writing to you. They will have the account for a few months and then it will move along the collection pipe line. Given your Citibank account is charged off, I would look to save up and negotiate a less than full balance payoff with URS, or the next collector that gets the account. I would estimate needing about 1500 to do that.
Payment plans with URS are not all that productive. Rather than throw a small monthly amount of money at this, I would save it up as quick as I could, and when your boyfriend lands a job, save up aggressively and make settling the Citibank account the top priority before anything else.
Hello….Thank you SO much for your site. I have spent hours reading over articles and have learned much. My husband and I had accumulated $86K in CC debt. I am self-employed, and recently lost about 75% of my income. We had enough equity to refinance our house with a cash payout….in order to qualify for the refinance, they also paid off $41K of the debt. There are some smaller cards that we are just going to pay off. Here is what will be left after we do that:
Dell 1687.82, Kohls 2973.90, Paypal 6665.27, Sears 11130.66, Advanta 2299.31, Walmart 2536.50, Chase 8776.00, Amazon 2655.38, and Cap One 2701.36. All are still current with the exception of Sears. It’s 19 days late. They have offered me 0% (down from 29%) with a monthly payment of $193 (down from $370) for 58 mos (until paid) for hardship. We are at the point where we will not be able to pay the monthly payments as they are. My question is since we do have lump sum cash from the refinance (about $37K), would it be best to try to settle the debts and get rid of it all, or pay off what we can and take a hardship payment plan for the larger balances, or a combination of all? The cards in question are in my name, and at this point I’m just tired of juggling it all so I’m not too worried about the credit score. Since I am self-employed, I was not part of the refinance…the mortgage is in my husband’s name and the debts that were already paid off were his and current. We have learned our lesson. Any advice would be greatly appreciated….thank you!
I would suggest you first call and speak with a certified counselor in order to get an exact quote of what you could reduce your monthly payments to by consolidating all the payments and taking advantage of the interest rate reductions they have with all of those banks. The call is free 800-939-8357 choose option 1 when you hear my voice.
If that lower monthly payment quote is not going to be something you can consistently afford, you and I should talk and break down what settlements are going to look like on those remaining accounts. You can reach me direct at option 2.
Yes
She is 76
Her income will soon be only 1582..00 s s
They will not lower her rate
Looks like we might have to get you to handle all of our debt
Can’t get anyone in this area to do it
IBoth of us are disabled and can’t get out much
Sincerely Don
You are welcome to call me for a consult at 800-939-8357, option 2 rings to me. I am on the phone a lot so be sure to leave a message I can return.
If I can help I will.
There are reasons why Capital One may refuse to offer to cut the interest rate on her credit card. I can cover that with you when we speak.
I tried Greenpath and they did nothing for me
They did not lower my interest rates
I got cap 1 to lower my rate to 8 with no trouble
My wife cannot get them to lower hers
Is your wife struggling with Capital One too, or is it another creditor?
Dear Michael B., Great site ! High interest cc strangle question. I’d really intended to have the wfcc paid off by now. Instead of monies going towards print and publishing my work and groceries, it’s being consumed by high interest rates on this one card. I’ve been approached by ” direct benefits” in wy. ( unsolicited by me, but timely. ) I was managing the necessary startup debt load by doing without pleasures and no internet or tv at home. ( audio books work great., and thankfully work_outs on the trails clears the mind ! :-)! .) Would you share your expertise, please ? Blessings for all the good you do. I’m not late on payments, but it is too tight to be productive and it’s chewing away at optimism. Many thanks, Sunny
What is the balance owed on wfcc, and what is the interest rate?
Do you have other unsecured debts, and if so, post the balances and interest rates on those in a comment reply.
You can see I moved your comment to a page about lowering your interest rates and getting a fixed monthly payment. The more debts you have the more it can make sense to consolidate them.
There are also one off hardship payment plans that you can look to set up with a creditor. Check out that article series and let me know what your thoughts are.
Hello Michael,
I was wondering if you could help me with my debt situation. I am not behind in my payments but I am sick and tired of not having extra cash when I pay all my credit card bills and other bills. I had a very good credit score a little over two years ago and was able to get a mortgage for 3.7%. After we got married though we had to deal with more debt because of wedding expenses and home remodeling.
We were able to get a personal loan for $20k to settle some credit cards (mainly store credit cards) with interest rates all above 20% with a 12.5% loan which we pay $500/month.
We now have around $20k on lower interest credit cards but high balances. I was wondering if you could assess if we can save money by getting into a credit counseling service. Here is the breakdown of the cc and personal loan debt:
Personal loan $17k @ 12.5%
AE $4,909.02 @ 14.5%
AE $887.92 @ 11.24%
Capital one $1,475.19 @ 13.5%
CU visa $4,986.55 @ 11.9%
CU visa $4,935.25 @ 8.99%
Discover $988 @ 22.99%
Walmart CC $670 @ 22.9%
I would appreciate it if you could give me some insight on my situation. Would I save more if I go through a credit counseling service? My score is not good anymore so that is not my concern at this moment. Also, do we need to close all the accounts or can I pay off one card but not close it and take advantage of the cash back?
Thanks in advance
Using the national monthly average when you are enrolled in a repayment plan with a credit counseling agency I get 753 dollars a month. That average can go up or down a little. The best way to get a to the penny quote is to call and speak with an agency directly which you can do by calling my hotline 800-939-8357. Option one will get you to a credit counselor.
There are people who are able to keep a card open while on the plan. It is easier to do that if the card has cross purposes, like something used for your business, or for travel for your job.
Let me know what you learn after the call.
Hi Michael,
My husband and I want to consolidate our cards, including a Capital One card. However, he has a Capital One business card (in his name only – he is self-employed). Is it possible to close one account but leave one open from the same creditor?
Thanks for your help!
…by consolidate I mean use a debt management program : )
Credit card consolidation is often used as a synonym for credit counseling programs.
Have you connected with an agency already? Do you have an accurate monthly payment quote, and know that it is something within your budget?
You can often keep one credit card out of a credit counseling agency repayment plan. Having the one account be with a creditor you have more than one with is doable, but you should talk that over with a counselor live. The fact that it is a business account, and not a personal credit card, could be helpful.
I can hit Capital One hard on some of their business practices on this site. But they are one of the most fair large banks out there when it comes to the parameters they have used with people working through a credit counseling company.
Thanks for your response! I’m glad that is an option to keep a card out of the program. I have contacted a reputable credit counseling agency here in Austin so I’m waiting to hear back from them so we can move forward.
Welcome. Post an update with how the program looks for you as far as affordability, and whether Capital One balked at having one credit card in, with another left out.
Hi Michael- I was just notified my job will be eliminated in 60 days due to workforce reduction. I am afraid of not being able to find a job quick enough in this economy and fall behind on all my bills. Obviously, I’ll need to priortize whatever money I’ve being given from my last check or savings that I have. With my severance i pay my creditors in lump sums if necessary. Unemployment will not cover all of my bill payments including my high monthly rent. I owe about 20-25k in unsecure debt and most of it to my employer which is among the top retail banks.
I am not behind on any of my bills, I’ve been consistently paying over the years and my credit is ok. And i don’t want any delinquency to get further into collections.
Can I negotiate with my original creditors now to reduce my credit card debt before I start being deliguent on my payments or at least reduce the interest on my credit cards?
Thank you for your time!
LR
Look into consolidating your credit cards into a single monthly payment with lower interest rates (and thereby lower payment amounts) through a credit counseling agency. You can talk to your creditors about any payment reduction plans they have, but if you are current with your minimum payments, most if not all of your banks are not going to have a plan for you. But they regularly work with credit counseling companies. Calls to legitimate nonprofit agencies are free, and you can get an accurate quote of what your payment reduction will be before committing your money.
If the lower monthly payments are not low enough, it will mean looking at settling or bankruptcy. But either of those is going to impair your credit for a little while, which I read your comment as something you would like to avoid if you can.
Post an update after you have consulted with a credit counselor.
Can collection agencies wait 5 years, 2 years before the debt runs out of the statue of limitaions to come after you and start the 7 years all over? I live in colorado and the sol is 7 years.
Chris – Check out the answer to your similar question here. If you have more questions about your current concern post them in that comment thread. It will help the conversation flow better.
Hi Michael,
After calls from the creditor attempting to collect money from my husband’s debt. He received a letter from credit card debt (DISCOVER) that says: “they have been authorized to proceed with legal action to secure the balance he currently owe. It says that if he does not reply by Sept. 30 by 8 p.m. (Easter time), the account will be forwarded to an Attorney to obtain judgment against him.”
Last payment he made was on January 2013. The debt, $7,500, is only under his name. We live in Houston,TX.
I’m worried about this letter. When you stop making payments, my understanding is that it goes to collection. How come he got this letter directly form DISCOVER and not from a collection agency?
Is this just a strategic to make him pay for the debt?
What can we do ?
Thank you
Julieta – Discover cards do get sent to third party debt collection agencies. Sometimes those collectors are law firms who have been authorized to sue. You can read more about working with Discover here.
Options at this point include trying to get set up on with an affordable monthly payment, either on your own, or through a nonprofit credit counseling agency, settling with Discover if you can pool together the resources, doing nothing if there are no affordable options due to income or budget set backs, bankruptcy, etc.
Once you read through that Discover post I linked to, post additional concerns in the comments on that page and lets go from there.
Hey Michael,
I currently have $14,500 in credit card debt spread out over 3 credit cards. I am not late on any of my payments, but I will be getting married soon. I have really good credit as of now. I was just wondering what do you suggest that I do. Do I try and settle on my own with the credit card companies or talk with a debt counseling service
Thanks
Jeremy
Jeremy – Are you making only your minimum credit card payments? If so, is that a stretch to do each month? Are you already a dual income household, or will the marriage bring an additional income?
Those questions will help determine if you can apply a debt roll up payoff plan on your own. See this report: https://consumerrecoverynetwork.com/debt-roll-up-pay-down-credit-cards/
If you are struggling with the minimums on your credit cards, what are your interest rates? A credit counseling program can help make your payments more affordable and get you out of credit card debt in a predictable time frame.
Settling with your credit card companies on your own is advisable only when you are unable to continue to pay on time, but want to avoid bankruptcy. Settling with your bank is covered extensively on this site. I suggest you start here to learn more.
Post answers to my question in a comment reply and I can help you through a process of elimination of how to manage your debt with these alternatives. It would also help to know what credit goals you have in the next 2 to 4 years. Are you thinking of buying a home, a car, going back to school and need loans to do so?
My wife and I are being contacted by CACH , out of NY city. We live in the Buffalo N.Y. area. Cach contacted us about a credit card debt that we have with a sears card. they seem like they are on a fishihg excursion . Who can we talk to in the Buffalo area ? We just want to clear this up.
Thanks Greg
Greg – If the debt is yours and you want to resolve it, you can call and talk to one of the specialists on this site at 800-939-8357 ext 3.
Dear Michael
I have citizenship to another country and will be permanently living abroad. I have a judgement against me (Midland Funding) which I complied with, went to court agreeing the payment of 6,298 in monthly payments of 50.00 until 4/30/2015 which a lump sum will be paid.
I will be unemployed starting 31st of Aug and I will not have a job in my new homeland country but will be going to school which I qualify financially for schooling because my income is so low. SSA early retirement equaling from USD to EUR 567.00 per month. I can not pay this judgement now.
I do not know what to do. Please advise if you can.
The Montana Eighteenth Judicial District Court. The attorney’s are Rausch, Sturm etc….
Thank you
K
Kathleen – That is a very interesting repayment structure you set up. I do not see that often, though I suspect it will become much more common. Not that it applies to your situation, but if others are interested in reading why I say that, read the article I recently wrote about Credit Counseling Agencies helping more with collection accounts in and out of court: https://consumerrecoverynetwork.com/reducing-debt-buyer-collection-lawsuits-default-judgments/
For you, the situation boils down to your ability to pay. 50 dollars a month is a really low payment on that size of balance. But a payment is only as good as your ability to afford it. You likely signed a stipulation that outlines your payment agreement. It would also outline what happens if you do not pay. If you live and bank abroad, there is not a whole lot that can be done to collect from you if payments stop. Just know that the balance will still be there, and will grow from the interest rate (set by the court or in the agreement you made). If you do return, you can make payment arrangements. You can also set up a new payment plan from wherever you are when you bounce back financially and have a steady income.
I need help. My husband and I currently owe around 78000 combined in credit cards and he suffered a stroke 2 years ago. We cant pay our bills and already behind 1 month. Our social security benefit together are only 1400 and 425 out of that is paid for his insurance. We hope that we could enroll in a payment program and reduce the debt and payment. I read somewhere that they would close all the accounts which is fine by us. I just hope that i would only need to pay for half of the total owed for 60 months. Please advise and help us.
Thank you so much for your advise
Working with a nonprofit credit counseling agency, and qualifying for the absolute lowest interest rates, may work. But not if the credit card bills total 78 thousand with monthly income of 1825.00. I would estimate needing around 1300.00 a month if that were the case.
If you meant 7800.00 as your total credit card balances, your combined monthly payments could get as low as 150-ish. What are your interest rates now, and on which credit cards?
I have a judgement against me for a credit card debt . They have a local attorney that took the case I called the creditor and they informed me that I have to contact the attorney . I am trying to buy a house and can’t use my va loan until I settle this judgement. How do I make a offer and what is a good dollar amount to offer on a 5600.00 debt that is with interest the original judgement was for 4000.00. Can I hire someone to make a offer so it is removed from my credit and the courts. Where do I start?
Please notify via emal I live in pa
Gk – This is a thread about lowering monthly bills like credit card debts using a consumer credit counseling agency. No credit counseling services in Pennsylvania, or anywhere else for that matter, make offers to negotiate or settle judgment debts. I wish they would, but that is another topic entirely.
In order to help you determine what is a good offer I will need more info about the credit card debt and your financial situation. Your follow up comment requested an email, so I will send one with my contact details. You can reply to that email with your number and some times that are good to connect, or just dial me direct at the number in the email.
I read the post and understand how a credit counseling agency works to help with my monthly bills, but I am wondering if it can help with my situation. I have 7 credit cards. Bank of America is about 7 thousand. I have 2 Chase credit cards that are both maxed out with 18% and 21% interest. Combined the 2 Chase accounts add up to 11 thousand dollars. My Target and Sams Club are each about two thousand. I have a gas card I owe less than a thousand and a Macys card I owe a little over a thousand dollars. My Visa with the Credit Union credit card has a balance just under $4000 and an interest rate under 10%. I want to keep this card. Will a credit counseling service still work with me?
A credit counseling service will definitely be able to help you get your monthly credit card payments lowered with Chase, Bank of America, Target etc. Your Credit Union likely works with credit counseling agencies too, as most do, but with a 10% interest rate on the credit union visa card, the payment will not likely be all that much lower on then it is now. But when you look at all of your credit card bills as a whole, the monthly payment reduction is going to be significant.
As far as keeping that credit card out of a debt management plan, that is often situational. You will have to talk with a credit counseling service to get into the specifics of keeping an account out of the plan. There are instances where that can happen, like a small business owner who needs to keep something open and active. Even if you include the credit union account, just know that you can use a debit card like you would a credit card for the time you are enrolled in credit counseling. After you finish a debt management plan you can look to reestablish another account with your credit union, or even Chase and Bank of America.
I have 32,000 dollars of credit card debt on 7 cards with Bank of America, Chase, Capital One and GEMB. My average interest rates are 17%, but one of the cards has an introductory rate that will expire next month which will raise my average rates. I am looking into a debt management plan so that I can afford my payments and actually make headway on paying the credit cards off in my lifetime.
I have been to some credit counseling websites and they all pretty much say the same thing. I have not called and talked with any counselor yet.
What questions should I ask when I call into one of these counseling agencies and would my situation and credit card debts be a good fit to use credit counseling?
West – Using a credit counseling service in your situation could make good sense. The credit card interest rates in a debt management plan through one of these agencies get reduced to somewhere between 1.7 and 2.5 percent. Those lower interest rates are for the life of the balances as long as you stick to, and make the lower monthly credit card payments on time – all the time.
If your monthly budget shows you can afford to pay what I estimate would be roughly 670.00 a month (taking the middle of the lower interest rate spread credit counseling companies have to work with of 2.1%).
Bank of America, Chase, Capital One and GE Money all work with consumer credit counseling agencies, so you will not run into a situation where some of your credit card payments cannot be lowered. Whichever of these credit cards is still on an introductory plan may be a concern, but it falls off the teaser interest rate next month. That card may/may not get included immediately into the debt management plan with the agency.
Calling a credit counseling agency and going over your credit card bills and other debts, along with your income, and then determining what you can afford to pay to your credit cards, is a simple exercise. The call with a counselor will go quicker if you have all of your bills and payments in front of you. It is not so much a situation where you would pepper a credit counselor with questions. Its more about calling a credit counseling service and getting a quote of how low your credit card payments can be reduced to in a debt management plan, and then looking at whether that is affordable. You would of course want to know:
Is the agency licensed in your state.
Do they have a good BBB rating (a complaint here or there is not a deal breaker, any large business gets them, but a pattern of complaints is a red flag).
Is the credit counseling service a legitimate nonprofit (there are a couple of for profit debt management companies, so nonprofit is not a requirement unless you live in AR, CT, HI, LA, KY, MA, NJ, NM, NY, ND, OK, or WY).
I hear you on the “pay off credit card debt in your life time”. Credit card companies now place how long it will take to pay them off if you make only minimum payments on their monthly billing statements. Look at yours and you may see the time to pay them off, at your current interest rates, and making only minimum payments, is 15, 20, or even more years!
The reason most any consumer credit counseling services website is going to say the same stuff – is that they all pretty much do the same stuff. There is not much to making a comparison of one agency to the next. You can reach a counselor at: 888-317-8770.
Does the 670.00 monthly payment estimate look affordable to you with your current income and other bills?
Thanks for this article. I’ve actually been looking for some good credit counseling in Houston to help me out. Any advice on how to find some good help?
You can call 888-317-8770 to speak with a credit counseling service licensed in Texas.
I have past due (6 months) account with American Express that has been placed with Zwicker & Associates for collection on Sep 29, 2016. Balance is $17,000.. I live in GA and have not been sued (yet). Account has been charged of and Zwicker offered me chance to pay $1200 for 3 months (to pay off past due balance) and then $400/month afterwards. Said they would review situation after 6 months.
I also spoke with Credit Counseling Agency (Money Management International) who said they could negotiate deal for me to just pay $418/month for 52 months.
It was good to connect with you on the phone yesterday Ed. Post an update with how thing progress for you with MMI and the credit counseling approach.
Update – MMI contacted Amex on my behalf with $418/month proposal. Amex didn’t accept proposal and said my account was in litigation (which it is not to my knowledge. I think maybe they just meant it was with Zwicker, since I’ve never received any notice of lawsuit, etc.). Anyway, I called Zwicker and they agreed to 12 month temporary plan which averages about $550/month, which I accepted. They also sent offer in writing. Once AMEX accounts go to Zwicker, is it impossible to work through consumer credit agencies like MMI? (which I would have preferred). Thanks