Feeling the Financial Crunch?

Be a savvy consumer of debt counseling or debt management programs. It's an unfortunate truth that not everyone offering to help you take control of your finances has your best interest at heart.

While a loan to consolidate all of your debt into a single obligation is appealing and may have a lower interest rate than credit card interest rates, make sure that you can repay the total amount of the loan. Be certain you clearly understand the terms of the loan, including the interest rate.   It may be that even lowering the interest rate does not make your present debts manageable, but just postpones the day of reckoning.

Confirm whether you will be required to make equal monthly payments over the life of the loan, or whether you will owe a “balloon” lump sum payment at the end of the loan term.  For many borrowers, balloon payments are just an invitation to another loan, and you never get free of the debt.

Understand the Debt Counseling Program and Don’t Overpay

If you participate in a counseling service that negotiates with your creditors or makes payments on your behalf, clarify whether the service promises to lower the amount you owe or the interest rate you pay, or just promises to lower the payments you make every month, without significantly changing your obligation.  Educate yourself about what will happen if a creditor refuses to negotiate your debt.

Make sure that any credit counseling program you use will address all of your debt. Some debt counselors confine themselves to resolving debt with unsecured commercial creditors, excluding your other ongoing obligations like child support or unpaid taxes.  

There are several debt management firms that charge reasonable fees.  Approach all services, even not-for-profits, with caution.  Make sure that the service is legitimate and cost-effective and that it won’t make your situation worse.

The LIFELINE Program May be Able to Help 

Call LIFELINE confidentially at 1-800-284-7575 and ask to speak with a financial specialist to explore which debt management options may be best for you and your family.  Taking advantage of this Getting Out of Debt service will help you take back control of your finances.  The service will pair you with financial specialists who will help analyze your spending habits, create and manage a realistic home budget, understand the wise use of credit, and get out of debt.  Your Employee Assistance Program provides this service at no cost to you as a HealthQuest benefit.