San Mateo, Calif. (PRWEB) January 23, 2008
For the many Americans who face a tower of unopened and unpaid holiday bills, it's time to get their financial lives in order, says Brad Stroh, co-CEO of free online consumer portal Bills.com -- and if they need outside help, they need to know the right questions to ask.
"Numerous online calculators provide a quick and easy way to get a snapshot of your debt load, but chances are, you already know if your debt is too much," Stroh said. "If you have trouble paying the bills, are receiving calls from collectors, are struggling to pay off bills from a medical episode or an accident, or get that sinking feeling when the bills come in each month, you are in too deep. It's time to re-assess."
Making a debt-payment plan
Most people can pay off their debt with a household budget and dedication, Stroh said. His quick-and-dirty method is simple:
1. Cut out all unnecessary expenses, and instead apply those funds to paying off bills.
2. Always make more than the minimum payment on the highest-interest-rate debt, while making minimum payments on other bills.
3. When the highest-rate bill is paid, add the payment to the next-highest-rate debt until it is paid.
For individuals whose bills are so out of hand that they are missing payments or have to choose among them rather than paying them all, it might be the time to seek help, Stroh noted. Various companies assist with debt repayment:
- Debt resolution firms negotiate on the consumer's behalf with creditors. They settle on a lower amount that typically can reduce total payments by 40 percent to 60 percent with a repayment term of two or three years. The credit score will be negatively impacted, but responsible credit use after completing a debt resolution program can rebuild credit relatively quickly.
- Debt consolidation rolls multiple debts into one loan or into a mortgage. It may or may not bring lower payments. Borrowers using a mortgage to consolidate put their homes at risk and might run up just as much credit card debt within a few years. Those considering debt consolidation must make sure they can afford the resulting payment.
- Credit counseling provides lower interest rates, with a repayment term of five to 10 years. Total debt principal is not reduced. Credit profiles can prevent access to credit while in the program.
Questions to ask a debt partner
People who are looking for a trustworthy organization to help win the battle against debt can ask Stroh's seven questions below to choose a reputable firm:
1. Compensation: Does the company get any form of consideration or compensation from the creditors themselves? Some firms receive funding in the form of what are called "fair share" payments from creditors. The payments are incentives to get consumers into debt management plans (DMPs), and could lead to a conflict of interest between creditors' and consumers' interests.
2. BBB: Is the company a member of the Better Business Bureau? A "yes" answer means the company is willing to have its practices scrutinized and to respond to consumer complaints.
3. Individualization: Does the company provide actual consultations and provide advice/education to consumers free of charge? Or is the company simply directing every consumer into a debt management plan?
4. Free education: Does the company provide educational material, including budgeting and financial advice, free of charge? Many firms consider educational material an additional fee source, not a benefit to their clients.
5. Background: What is the background of the company's management team? Look for good, relevant education and experience -- not a team that jumps from opportunity to opportunity to make its fortunes.
6. History: How long has the company been in business?
7. Success: What are the company's dropout and success rates? Request these statistics. Leading credit card companies report that many credit-counseling firms have dropout rates as high as 90 percent.
"Above all, trust your instincts," Stroh said. "Numerous organizations can help you resolve financial issues - with integrity and skill."
Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. The company blogs about consumer finance issues at http://www.bills.com/blog. Since 2002, Bills.com has served more than 30,000 customers nationwide while managing more than $500 million in consumer debt. Bills.com is a division of Freedom Financial Network, LLC, whose co-founders and CEOs, Andrew Housser and Brad Stroh, have been named Northern California finalists in Ernst & Young's Entrepreneur of the Year Awards.