As consumers evaluate their financial situation, many will realize they need help creating a budget and managing their debt. However, consumers are often confused about their options and do not know how to choose help for their credit problems. Springboard Non-Profit Consumer Credit Management advises consumers how to choose help with credit problems.
(PRWEB) February 12, 2005 -- This time of year, consumers evaluate their financial situation and many will realize they need help creating a budget and managing their debt. But when they open the yellow pages or talk with family and friends, they quickly become confused about their options. TV and radio ads sound too good to be true.
Springboard wants consumers to know the difference when choosing help with their credit problems," says Dianne Wilkman, President/CEO. There are options depending on your unique situation and its important to be a knowledgeable consumer."
Springboard offers this summary of credit help options:
Credit Counseling Organizations: credit counseling agencies fall into two categories: member affiliated agencies and independent agencies. While several member groups have been formed, the two leading umbrella organizations that many agencies affiliate with are the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies.
The credit counseling industry was originated through the National Foundation for Credit Counseling, Inc.® (NFCC) and has more than 125 community-based members. Springboard carries the NFCC Member seal, which serves similarly to the Good Housekeeping" seal of approval. This seal helps to assure consumers that they are receiving services through an agency that is accredited, has certified credit counselors, protects client funds, credits consumers for all debt payments and offers free and affordable services.
Many of the new highly visible debt services agencies that are strictly national phone bank centers are not affiliated with either of the two organizations above. While they all advertise as nonprofit agencies, many of the new debt service/counseling agencies operate like for-profit entities. Some of these agencies have aggressive telemarketing and advertising strategies to get as many people as possible signed up on debt plans as a means of boosting their revenues. With some basic budget counseling and coaching, many consumers are able to self-correct their financial situations and should not be enrolled in debt plans.
Debt Consolidation Companies are a different kind of consumer finance service. These financial institutions offer loans to settle consumers debt by paying off current debt obligations. Some loan products include high interest rates and extensive or high penalty fees which are not well-disclosed and which results in more debt. Some financial institutions have undisclosed relationships with independent credit counseling agencies. The credit counseling agency will serve as the front line to recruit clients with the goal of enrolling consumers in a debt consolidation plan under the guise of credit counseling. Telemarketers or counselors often operate under financial incentives to get as many people as possible signed up for loans, regardless of whether the loan is in the best interest of the consumer. One of the dangers is that many consumers sign up for consolidation loans to pay off their credit cards, and keep using their credit cards.
The outcome: they are stuck with the loan and the new credit card bills and the deep debt cycle continues. However, if a consumer uses a debt consolidation to pay-off multiple credit card accounts and is careful to repay the loan and discontinue use of those credit accounts (to ensure they are not piling on more debt), a consolidation loan can be a useful financial tool.
Debt Settlement Companies are another group that advertise to "settle your debt." They will suggest that a consumer stop paying a creditor and instead pay into an account with the debt settlement company over (6 to 12 months) who will in turn negotiate an account pay-off in a lesser amount with the creditor. For example: if a consumer owes Sears $5,000 and the consumers account is in default, the settlement company will recommend that the consumer discontinue payments to Sears. The payment funds are then redirected to the debt settlement company.
Once a consumer has paid a certain amount to the debt settlement company (say $4,000), they'll contact Sears on the consumers behalf to settle the debt for a lesser amount. The creditor will often settle. The danger in these services: once consumers stop paying their creditors, the creditors can file negative payment information on consumers credit reports. This is damaging to a consumers credit, since credit profiles are largely based on consumers payment behavior. Some companies claim that will have the information removed from a consumers credit as part of their negotiation with the creditors. This is not guaranteed, since accurate account payment history can stay on consumers credit reports for seven (7) years. Also, some debt settlement companies also levy hefty fees that are sometimes not disclosed to consumers.
About Springboard Nonprofit Consumer Credit Management
Springboard, a nonprofit credit counseling and education organization founded in 1974, offers assistance with money management and budgeting through confidential counseling, debt management and education programs for financially troubled consumers. Springboard is accredited by the Council on Accreditation of Services for Families and Children, signifying high standards for agency governance, fiscal integrity, counselor certification and service delivery policies that ensure low-cost confidential services performed in an ethical manner. Springboard is a member of the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies. Springboard has counseling locations throughout Southern California offering face-to-face, online and nationwide phone counseling services. For more information on Springboard, call 1-800-947-3752 ext. 702 or visit their web site at www.credit.org.
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