You’ve probably seen those ads on TV: Nice looking, smiling people thanking XYZ Debt Consolidation Service for making their lives worthwhile once more by lowering their monthly debt payments.
But is XYZ really your new best friend? Maybe.
Reducing debt is definitely the way to go, especially high-interest credit card debt. But before you sign up with a credit counseling outfit, try to crunch your own budget and negotiate directly with your creditors.
But if you can’t do this yourself, at least do some comparison shopping.
Talk to at least three agencies. Be sure to avoid those with complaints against them at the state attorney general’s office or the local better business bureau. Look for agencies that take time to carefully go over the details of your financial situation. According to the Consumer Federation of America, if they offer debt-management plan within 20 minutes of your first meeting, that’s a bad sign.
Make sure you get specific estimates of the fees… ask whether agency employees get sales bonuses for signing you up… and don’t sign until you know that your creditors have all been contacted and have agreed to the plan.