Debt Counselors

The tension from high debts is killing our marriage. While we want to get on a budget, our credit card debt of $20,000 makes it impossible to develop one that allows us to meet our needs. I've heard of organizations that can work with creditors to consolidate loans, and maybe even reduce interest rates. Should we use the services of one of these firms?

Remember that burying your head in the sand and hoping the problem will go away is the worst thing you can do. When a family's credit card debt reaches such a level that they can't even manage the minimum payments required by the creditors, one solution is to seek help from a credit counseling service.

Whether or not you use a credit counseling service, make sure you communicate with your lender. In most cases, they'll be much more willing to work with you if you are open with your problem.

You'll want to use caution in locating the right service for you, and do your homework before using a program. If you open the yellow pages under “credit,” you'll find a multitude of credit counseling services. Some of these will be for-profit organizations, while others have nonprofit status. Some will “cherry pick” the loans they will assist you with.

You'll want to find an organization that will deal with all of your consumer credit. Many local agencies are affiliated with the National Foundation for Consumer Credit, which was founded in 1951. These agencies have a good reputation and would be a good place to start.

If you go to an agency affiliated with National Foundation for Consumer Credit, you can expect them to offer free budget and credit counseling. They also offer debt management plans. For a relatively modest fee, they will set up a consolidation loan. This results in you making one payment to them. They then make disbursements to your creditors based on a negotiated schedule.

Because they have established relationships with lenders, they will frequently be able to negotiate favorable repayment terms, such as a reduction in the interest rate. You can expect the repayment plan to take anywhere from one to five years.

Many couples make a mistake when consolidating their debt by using the hard-earned equity in their home. Not only does this turn short-term debt into long-term debt, but couples often find themselves back in debt within a year because they failed to deal with the root cause of the problem.

Remember that a key to solving the problem once and for all is to get on a budget and to consistently track your expenses in relation to the budget, so you'll know you're living within your means. God love you!

Phil Lenahan is executive director of Catholic Answers.

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