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It seems that almost every time you turn on the television or the radio, you are inundated with ads from debt management or consolidation companies. They promise that they can help you avoid bankruptcy and silence calls from creditors. With so many people mired in debt, coupled with a sluggish economy that is leaving more and more folks without jobs, there definitely is a market for these services. Many individuals who are desperate and looking for a way to hold on to what they have and improve their financial situations are turning to such companies as a way to get back on track.

However, what some people are finding is that they are ending up worse off than when they began after using such companies. This is because some debt management companies are not actually looking out for their client’s best interest but instead are looking to fleece them by charging large administrative fees. Other companies have no intention of doing what they promise. Instead, they are looking to get wealthy on the backs of people who are willing to hand over their hard earned money in a last ditch effort to correct their financial woes. These types of establishments often leave their members worse off than when they walked through the door. Below, we will take a look at which types of debt management companies you should avoid.

a. Avoid companies that prove to be unreliable: Refuse to do business with companies that don’t do what they say they will. This can be difficult to gage at first, so you need to be on the lookout for the little things. Are they hard to reach? Do they refuse to return your phone calls and/or emails? These are often tell-tell signs that a company is unprofessional and perhaps even unethical. If they are ripping people off, they won’t want to answer their phones or any other type of correspondence. Instead, they become masters of avoidance. There is always an excuse for why they aren’t able to do what they promised they would. Do not do business with these companies and if you have already, do whatever you can to sever the relationship.

b. Avoid companies that charge high fees: There are many non-profit debt management companies that will work for you free of charge or for only a small monthly fee. In some cases, the fee will be voluntary and you can opt out of paying it if you wish. A payment of between $15-$25 per month is about the norm. Also, watch out for companies that ask for large amounts of money upfront. Often times, these will be disguised as “administrative fees”. Even though these are not unheard of in the industry, you shouldn’t expect to pay more than $50. Any company that is attempting to charge you significantly more than that should not get your business. You can find many debt management companies which will provide the same services for far more affordable rates.

Some companies will attempt to get you to pay hefty fees by promising that they will be able to fix your credit or get you much lower interest rates. Remember, it doesn’t matter how good it sounds, a debt management company cannot guarantee that they can get you a certain interest rate or wipe your credit file clean. Sure, some may have established relationships with certain creditors and they will likely be able to get your interest rates reduced but credit card companies do not have to offer lower rates (there’s simply no way to force them). Keep this in mind when you meet with a fast-talking debt management company representative who seems to be promising you the world. The truth is that non-profit companies can provide you with the same services without the excessive fees.

c. Avoid companies with a poor reputation: This one should be obvious. However, you would be surprised at how many people do not check the backgrounds of the debt management companies that they are considering working with. This is a big mistake and can end up costing you big-time in the long run. It only takes a little effort and some digging to determine if a company is worth doing business with or should be avoided. The Better Business Bureau is a good place to begin. You will need some basic information about the company in order to investigate. The name of the company as well as the city and state where their home offices are based should be enough. You may want to check with the attorney general’s office and also perform a Google search. Often times, you will find the rants of people who have been ripped off by a certain company online. If you repeatedly find that people have had bad experiences with a particular organization, it is best to look elsewhere.

We may be in for a bit of turmoil. The  credit card  issuers who for years, did pretty much whatever they wanted without moderation are not too excited about the new upcoming changes. They have warned, that if the bills go through, we will all regret it. We have about nine months before these laws take hold, so until then it’s the wild west.

The benchmark prime rate which all others are based upon has fallen.  The last year has seen a record drop of 2% to 3.25%. So one would naturally assume that credit card rates have also fallen.  Wrong. Over the last year, the rate for credit cards has went up almost 1%. Now that the credit companies and banks are soon to get squeezed by Obamas new laws,  expect them rates to go even higher.  The big banks are under a lot of pressure to make a profit and stay afloat themselves,  so they are not going to be cutting consumers any slack.

Banking and Credit card  fees

The big banks and credit card issuers make a ton of money from fees. Late fees, balance transfer fees, foreign transaction fees, cash advance and ATM fees, yearly fees, and of course the “just because we feel like it fees. Watch your billing statements carefully. Compare them with credit card statements from past months and years. You will likely see some new and/or increased fees added. As the credit crunch and recession continue, the big banks make more and more money from adding on fees. So be alert, and read the fine print. A few of my cards seem to be changing the terms almost daily and I don’t think this is a rare occurance.

Rewards are dwindeling

You favorite cashback reward,  or airline miles card may soon be giving you the finger. The intense competition we have seen in past years for customers seems to have dissipated and the banks all decided in tandem to tighten the screws. The days of receiving a ton of zero percent interest rate offers in your mailbox are also going by the wayside.  Once again check the fine print. Read your constantly updated terms and be informed or you may be in for a nasty surprise when you find out that you no longer receive as many miles or rewards as you previously did. The whole industry is in turmoil after the big bank bailouts and there are likely more changes to come as banks figure out ways to recover from staggering losses and upcoming credit reform laws.

The best plan of action is education and comparison. Compare as many different plans and offers as you can find and don’t be shy to drop one and pick up another. The phone is also your friend, use it. Don’t be shy about calling up your lenders and asking about fees and interest rates on your account. They will still often drop or reduce fees or interest rate hikes. They make a huge amount of money because of the average consumers complacency and laziness or fear of dealing with such matters.  When they try to pull a shady maneuver, call them on it.  The worst thing you can do is sit idly by and watch your hard earned money go towards another huge bonus for the bank CEO’s and executive staff.

Yes, I know, it sounds crazy and against all that banks believe in, but sometimes credit card companies and banks will actually forgive a portion of a consumers outstanding debt. The big banks know that in some situations ‘a little’ is better than ‘none’. In extreme cases, banks have forgiven up to 70% of credit card debt in exchange for complete payment of the remaining 30%. Nothing is static in these volatile times we are living in. Once again, calling and discussing your options directly with the banks can be beneficial.

Is Credit card debt forgiveness good idea?

Sounds wonderful doesn’t it? The downside is that credit card debt is never forgotten. You can consolidate credit card debt and negotiate for forgiveness on some of it, but banks will surely make a note of this on your credit report. This type of debt consolidation or debt reduction will always be reported as non-payment and will of course stay on your personal credit file for many years.

Who can consolidate debt from credit cards using loan modification?

For the most part, this drastic plan to consolidate debt and reduce liabilities is only for those who have no income and have not paid their bills in many months. If it looks like you can still make some payments then banks will likely want you to just keep paying and milk your account for long term interest charges and fees. These loan modification agreements are in the banks best interest, not yours, so they will pick and choose when to negotiate. Credit counselors can help assist you in these credit card debt negotiations but beware of huge fees and percentages added to the total. You might be surprised at how well you can negotiate your own loan modification program and the experience will teach you a lot about the whole process which can help you to consolidate debt in the future.

A debt management program is designed to help individuals who have become overwhelmed financially. In many cases, these individuals have gotten behind on payments to their lenders or feel that they might if something is not done. Debt management programs often offer the same services as debt consolidation programs or companies and many people use the terms interchangeably.

Depending on who you work with, a debt management company may be able to help you negotiate lower interest rates on much of your outstanding debt, get late fees you may have accumulated waived, consolidate your debt and assist you with coming up with a payment schedule that works for both you and your creditors. We will discuss how a debt management program can help you get back on track in more depth below.

Debt Management Companies Negotiate Lower Interest Rates: Many people have trouble paying back what they owe and that is often due to the high interest rates that some companies charge, especially credit card companies. If people have missed a payment or paid one of their other creditors late, they may find that the interest rates on their charge cards have increased significantly. It’s no wonder that this happens. Credit card companies are in the business of making money and they are continually coming up with new and “creative” ways to charge their customers more money.

These increased and often arbitrary charges have become such a problem and have sparked so much outrage throughout the country that Congress is currently taking up the issue. In the meanwhile, debt management companies work directly with your creditors (mostly credit card companies) and attempt to negotiate cheaper interest rates on your behalf. Most of the best debt management companies will already have relationships with various credit card lenders and will be able to get their members significantly reduced rates. There will be companies that refuse to drop their rates or will only do so nominally. In those cases, there is little that can be done besides paying what they require.

Debt Management Companies Get Late Fees Waived: Now this won’t always be the case. However, some of your creditors will agree to waive your late fees if they know that you are working with a debt management company. Working with these types of companies shows them that you are serious about getting out of debt and that you are taking steps to responsibly manage what you owe. They understand that late fees can be prohibitive, so they may be willing to waive them. This can save you a lot of money and make it much easier to get back on your feet. Many times, when people start to feel overwhelmed, they simply stop paying. Creditors want to avoid this because they are extremely invested in people paying back what they owe, so they are sometimes willing to work with you.

Debt Management Companies Consolidate Debt: One of the biggest benefits when it comes to debt management programs is their ability to consolidate your debt. This should not be confused with a consolidation loan. Instead, these types of companies will list out everything you owe and then help you get rid of all of your debt in a pre-determined amount of time. In this way, it is not a true consolidation. Your outstanding debt will not be moved to one account, one loan or one credit card. However, you will likely pay the debt management company one check which they will then distribute to all of your creditors.

Debt Management Companies Help You Develop a Payment Schedule: One huge advantage of working with such companies is their ability to help you come up with a payment schedule that will enable you to eventually pay off all of your debt. Most design programs that take between 3-5 years. This means that in a certain amount of time, you should be debt-free. The company will be able to calculate exactly how much you need to pay each month so that this can be accomplished.

A debt management program can have many benefits. These types of companies are able to provide many valuable services. They may be able to help you negotiate lower interest rates, get late fees waived, consolidate debt and develop a repayment schedule that allows you to become debt free in 3-5 years. While many companies are non-profit and either don’t charge anything or only a nominal fee, there are some that will attempt to charge you a good chunk of money. Don’t do business with these companies, simply choose the ones that you think are able to help you get back on track.

So what exactly do the new credit card reform laws mean to me?

For the short term, they mean more shenanigans and tomfoolery from the big banks and credit card companies.  The heavies in the credit card industry are not happy about these new laws.  The laws don’t take effect for some time and until then, you can bet credit card issuers will do everything they can to make more money and improve the bottom line.  With the big bank bailouts and overall credit crunch that comes with a recession, there is a huge amount of bad debt on the books.  Tons of people missing payments and loans going unpaid.  Now we add the further restrictions of a wide ranging group of new credit card laws and the banks are getting nervous.  We all know what direction the brown stuff flows,  so its an easy guess to know who is going to pay more.  We are.  The next 8-12 months will be full of fees, interest rate hikes, and credit limit chopping as the big credit card companies scramble in the remaining days of wild west lending practices.

Credit card limits and perks

One obvious way the big boys will reduce exposure to bad debt is by reducing credit card limits.  The people who have plenty of money, or a steady job and good money management skills will not be affected too much.  The people who for whatever reason make a late payment once or twice, or run up balances too quickly, or set off any of the unknown and known  ‘flags’  will be immediately put into the ‘high risk group’ and may see their credit limits drop without warning.  Credit card companies are on edge,  nervous, and quick to excite.  It doesn’t take much these days to get your name thrown into a pile of other questionable credit consumers.  There have even been some reports of people with excellent credit who pay their balances each month  getting credit limits axed.   So if they see you as a risk, or as safe but not making them much money, you might be saying ‘bye-bye’  to your current high credit limits.

The days of getting flooded with zero percent interest credit card offers and other perks have been on the way out. Your favorite mileage card or ‘cash-back’ card could be changing the policy any moment.  In fact, many cards have been changing policies almost weekly.  Reducing, or completely doing away with the great perks and advantages like earning miles.  The whole credit card and banking industry is in crisis mode so expect this to be a tumultuous time.

Watch your Banking and Credit card fees – be alert

It is no big secret that banks make money from fees.  They are not just giving us money to use because they care so much about us.  These fees for the last few years have become quite nasty and downright sneaky.  The golden rule is “Watch them like a hawk”.  This of course, is easier said than done.  Who has the time to read the constantly changing policy statements and dig out the magnifying glass and to  separate the interest charges from the add on fees?  Not me, and likely not you either.  You just do your best, and always be watching for changes.  When the new laws take effect this process should become much easier.

I will be going  into more detail about what exactly is in the new credit card laws over the next few weeks and months, but for now here is a sample of the changes:

• Protection from quick,  sudden interest charges,  and from increasing the interest rate in an accounts first year or on already existing balances.

• Banning the sneaky  “two-cycle billing” method.  Basically if you completely pay your balance one month, but not the next month, the crooks calculate the interest based upon both months.

• Give consumers more time to pay the credit cards.  Statements must be received 21 days before the payment is due.

• Ban another sneaky practice of applying payments to lower interest rate charges first while the higher interest rate balance goes untouched.

• Require a 45 day advance notice of upcoming interest rate increases.

So as you can see, it’s all a nice step in the right direction and it will eventually improve in the consumers favor, but until this happens you need to stay vigilant and alert.  There are a few things you can do in the meantime.  First of all, don’t be shy.  Pick up the phone and call the credit card company if you see any strange fees,  interest hikes,  or credit limit changes.  Complacency is the banks best friend. Most people never question or call them and the ones who do are often rewarded with lower rates and better terms.  If this doesn’t  work,  then don’t  hesitate to move your  balances and accounts to another lender.  As consumers, we have the power to shop around and take our business elsewhere.  I know when I was working fervently to get out of deep credit card debt I changed credit cards all the time and always moved from a higher rate to a lower rate.  The worst thing you can do is to just watch them take advantage and collect huge fees, and charges.

So your in debt, don’t worry it happens and is happening to millions of people right now. These are unprecedented and difficult times. Keep your head up, avoid any irrational actions and just keeping hacking away at the debt.  Here are the top five things to do now to get you on the right track.

1. Know your exact situation

Sit down with a pen and paper and find out exactly how much debt and payment obligations you currently have.  Find all your old contracts, bills, and statements so you are not guessing.  Pick up the phone and call your credit card company and loan institutions.  You will need a detailed account of your current liabilities and debts.  Take your time, this should not be rushed.  It is important to know where you currently stand.  Then make a nice spreadsheet so you can track your progress.  The confidence boost of knowing you are making headway and seeing real gains will get you through this process.  The only way to have this is to first have an accurate account of your debt.

2.  Make a plan – organize and prioritize your debt management

Now that you have the organized account of you debts, it’s time to get busy.  Add another column to your spreadsheet called ‘interest rate’. Now go through and enter the current interest for every single debt you have.  The idea is to pay down the highest interest rate debts first because these are the ones that are doing the most damage to you finances and killing your debt management plan.  I personally am a big fan of small, reasonable consolidate loans.  Take a 19% interest rate credit card and transfer it to a 9% rate credit card.  Slowly slowly keep doing this over time and you will be amazed at the results. Trade the higher rates for lower rates and soon the average interest rate you are paying on your debt will be much smaller.  So have a plan.  Keeping organized, making and following a plan is a small price to pay and the result is huge.

3. Curb your spending – make a budget

It’s one thing to say that you need to spend less money, it’s another thing to actually achieve it.  The key to success, is once again organization.  Write everything you buy and how much you spend for each thing down on paper for one month.  Yes I know, what a pain in the hoohoo!  This will only be one month.  You can do almost anything for one month.  When the month is finished, take your valuable data and compile into a legible and readable document or spreadsheet.  You will be  amazed to see a fair amount of  ‘fat’  that can be easily trimmed from you current spending. You can now create a budget.  The key to long term success with a budget is the same as dieting;  think long term.  Don’t make your budget painful and impossible to follow or you will be setting yourself up for a rebound and possible loss of ground.  Make you daily, weekly and monthly budget workable and enjoyable but sensible.  Such small things like buying a coffee thermos and making your coffee at home will save on expensive trips to Starbucks.  You get the idea.

4. Do not add more debt

This one seems obvious, but is a classic cause of further debt. You don’t really need a new car, or to buy a new house.  Get your personal finances in order first before even considering new debt obligations.  We are suckers for all the advertising and actually believe we need these objects to make us happy.  Don’t buy it, more shackles and heavy weight of being under the prison of debt is not going to make anyone happy.

5. Debt collectors – be like a duck

When the debt collectors come knocking or calling, deal with them firmly and calmly.  Let the stress and threats roll of you like water on a ducks back.  If you pay them,  make a deal to get a deletion from your credit report.  Some creditors will agree to delete the account from your credit report if the request comes from a collection agency.  This is a good example of how even when our backs are against the wall, there is still a little room for negotiating.  Speaking of making deals, don’t be afraid to call the credit card companies and banks and ask for a lower rate.  Making a phone call can save tons of money in long term interest fees.

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Submit your articles, blog posts, and consolidate related information and join us as we venture into carnival land.

If you have been forced to go to a debt counseling organization for help with your finances, it is important that you learn from the experience. Otherwise, you will simply find yourself back in trouble, perhaps much worse the next time around. The first thing that you need to figure out is how you got behind in the first place.

Next, it will be important to recognize how a good, responsible spending plan can make life easier. A spending plan will help you organize your income and expenses. You will know exactly where each dollar will be going each month. This is very important.

People who are poor financial mangers tend to spend without a plan and end up hoping that they have enough money left over to pay their most important bills, i.e., mortgage, rent, car and food. On the other hand, individuals who are successful at managing their money choose the opposite approach. They pay their fixed expenses first and then put money aside for the non-essentials.

Lastly, the importance of keeping up with your finances and the potential problems that arise from misusing credit is a must-learn lesson for an individual or family who has been forced to go down the path of debt counseling.

Lesson #1: What caused the debt problem: Perhaps the biggest lesson that someone who has gone through debt counseling should learn or figure out is what led them into financial trouble. Does someone in the household have a problem with compulsiveness or perhaps a shopping addiction? Were the financial problems simply related to not keeping good records of what was coming in and what was being spent? Is someone depressed and thus spending money in order to feel better? Is the family attempting to keep up with the “Smiths”?

The reason why figuring out the cause is so important is because nothing will likely change if the underlying issues are not treated. For example, a person who has a shopping addiction may need to get counseling. If he or she does, then that person might stop spending once a financial crisis arises. However, without help, it is likely that these people will resume their old habits when they feel that they are able to. If the problem with spending has to do with simply not keeping good accounts, this can easily be remedied by purchasing budgeting software.

Lesson #2: The importance of a spending plan: People who have been forced to take advantage of debt counseling to get their finances under control should now understand the importance of a spending plan. Unless a person has lost his or her job or has simply taken on more expenses than his or her income can cover, not regularly budgeting is often the culprit.

Without a spending plan in place, it is very easy for your financial situation to become a free-for-all, with each partner attempting to buy what he or she wants before the money runs out. This will become disastrous. Individuals have to come up with a budget and stick to it as much as possible.

Lesson #3: Why tracking your finances and implementing changes immediately will prevent many problems: A budget is not necessarily set in stone. Things happen and circumstances change. You might find that you have not allotted enough money for certain bills or do not need so much money for other things. By tracking your expenses, you can figure this out and make the appropriate changes. You may also experience an increase or decrease in income which may also affect your budget. This way, your budget may become a bit fluid and that’s perfectly fine.

The trouble comes when you don’t recognize or respond to financial changes that may affect your budget. When you don’t take this information into account, you may not know that you need to cut back on some expenditures or that it has now become necessary for someone to pick up more hours at work, get an additional job or even a completely new one.

To avoid this, simply reconcile your accounts every month. Check and see where you have budgeted too much or too little and then make adjustments. Better yet, reconcile as you go along. As soon as you pay a bill, check it against the budget and see if you are now ahead or behind, then make adjustments as needed.

A debt management plan is an effective tool that can help you improve your financial situation. Once you have come to the realization that your debt has gotten out of control, it is time to take action. This sort of plan will involve several steps. You will need to first get honest and admit that you have a problem. Next, take an inventory of your debt and your income. It is also important to contact your creditors and see if they might be willing to lower your interest rates. The development of a budget needs to take place and then, lastly, the creation of a repayment plan. In this article, we will find out how to properly create a good, working debt management plan. There are companies which will handle a lot of this for you. Sometimes, it is good to work with such organizations. However, it is not necessary. Just about everything that a debt management company can do for you, you can handle yourself. You only need to become educated on how to go about it. Below, we will show you how to get started:

Be Honest: Many times, people get into debt trouble because they are not honest. They don’t admit to themselves or to their partner that their spending is out of control. They may dutifully pay their minimum credit card balance and ignore the outstanding one. If you want to claw your way out of debt (and yes, it will be a fight), you have to get real and acknowledge that you are in trouble.

Take an Inventory of Your Debt: Now is the time to pull out all of your bills and make a listing of just how debt you are in. This will give you an accurate picture of what you really owe. You will no longer be able to ignore everything. While this may be painful, it is absolutely necessary.

Figure Out How Much Money Is Actually Coming In: Now that you know exactly what you owe, you need to have a firm handle on exactly how much money you are bringing in. This is very important. If you are not making enough money to pay back what you owe, someone in the household may have to get an additional job or cutbacks will have to be made somewhere as far as your budget is concerned.

Make Some Phone Calls: Begin calling the companies or people you owe money to and see if you can convince them to lower your interest rates and/or wave certain fees. If they refuse, fine. You can’t force them to give you a break but at least you know exactly what you are dealing with. This is vital when you are creating your plan. You will need all of the pieces.

Create a Budget: Once you have a clear idea of what’s coming in and what needs to go out each month, you are in a good position to sit down and create a budget.

Create a Debt Management Plan: A debt management plan goes a bit deeper than a budget. A budget will dictate how you will pay your bills each month. A debt management plan is a roadmap for paying off all of your debt. After you have finished creating one, you will have an idea of exactly how long it will take you to pay off your debt.

This can be very beneficial because it can help you stay on track. If there is a plan or roadmap in place that shows you exactly when you can expect to get out of debt, it is much easier to make good financial choices. When there is no plan in place nor end in sight, it is much easier to mismanage your money and to continue to make purchases that you either cannot afford or that won’t benefit you at all financially.

If creating a debt management plan makes sense to you, go for it! It is a good idea (actually, it is best one), to get everyone in your family on board. It will make things much easier if everyone has the same goal, to become debt free. However, this isn’t always possible. If it isn’t, do what you can to lower your personal expenses and then save any money you have left over. In time, you may be able to use that money in a way that benefits you financially.

Debt Consolidation is very popular in these times of global financial crisis. Loan consolidation is not for everyone, and you should look into your own personal financial situation before making a debt consolidation decision. Combining your debts, and combining your loans into one big consolidation loan can be risky and or quite rewarding. One size does not fit all loan consolidation and debt consolidation scenarios.

Consolidate your debt and consolidate your loans. This is a common and timely phrase we often see or hear. Does debt consolidation really help out in the long run? Is debt consolidation good? Is it wise to consolidate my debts? These are common questions and should be researched and looked into thouroughly before making any debt consolidation decisions and before you consolidate your loans you should seek the advice of a trusted financial advisor.