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Question: I tried to use my credit card and my charge
was denied. I am maxed out on that card (and several
others). I need help.
Answer: If your debt is more than you can pay back on
your own in six months, you would benefit from a debt
repayment plan. Be sure to go to a nonprofit agency, not a
company that will charge you high fees and leave you worse
off than you are now.
There are a number of credible, effective agencies that
will help you analyze your income and your monthly expenses
and work out a debt repayment plan for you. A counselor
negotiates with your creditors to stretch out your payments
so it is possible for you to completely pay off your debts.
Each month you send the agency an agreed-upon amount of
money. The agency then sends your payments to your
creditors. Based on your income, this service may be free or
you may be charged a fee based on a sliding scale.
A debt repayment plan will help you repay unsecured
loans. Unsecured loans, such as credit cards and medical
debt, are not tied to an asset. A secured loan is based on
an asset such as a car or furniture, which can be
repossessed, or your home, which you can lose through
foreclosure.
Paying off your debts with a debt repayment plan will
not erase them from your credit history. On the other hand,
most creditors look favorably at someone who is working to
fulfill their financial obligations.
There are a number of credit counseling agencies that
can help you accomplish your goals. There are also a number
of crooks in this business. Never deal with an agency that
wants to charge you up-front to disburse your payments.
Another scheme to avoid requires you to pay substantial fees
to obtain a loan to payoff your bills. It is illegal to
require Consumers to pay before fully performing promised
services.
Legitimate companies will send you information about
their programs before you sign up. They will also provide
educational materials and answer your questions without
payment of large fees.
Next week: five types of not-for-profit credit
counseling agencies.
For more information, contact your local
Colorado State University Extension office.
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