NASHVILLE, Tenn. (WTVF) — For many families, credit card debt is a huge source of stress and when the bills keep piling up, it might seem like there’s no way out. But before you lose hope, you may qualify for debt consolidation.
Consumer Reports breaks down how it works, how it’s helping families, and what to know before you sign up.
“As we came closer and closer to the end of paying it off, we just felt better and better,” said Ian Morris.
Morris’s credit card balance reached nearly $100,000. After he lost his job in academic publishing, his family leaned on credit cards to cover everyday expenses like car repairs, groceries, and more.
“So basically, what was happening, there was a sense of frustration.”
That’s when Morris turned to the nonprofit Money Management International for a debt-management plan, and within 5 years, he says he was able to pay it off.
But before you look into consolidating your debt like he did, keep this in mind. A lot of people eager to get out of debt are being targeted by scams, which can make a tough situation even worse.
Consumer Reports Lisa Gill says watch out for these red flags.
“Be careful with companies that communicate to you out of the blue, or who pressure you into making a quick decision, or even ask for money upfront," said Gill. "Legitimate debt relief agencies don’t do that.”
By law, if they’re selling debt services over the phone, they’re not allowed to charge you upfront before actually lowering or settling your debt.
Consumer Reports says legitimate agencies will explain the fees clearly and won’t pressure you into anything.
To find a reputable service, head to the National Foundation for Credit Counseling. It’s a trusted resource for accredited agencies nationwide.
If you decide to move forward with a plan, here’s how it usually works.
“The program combines your payments into one monthly bill, often at a significantly lower interest rate, and gives you a clear timeline - usually three to five years - to pay it off.”
Money Management International estimates that someone with around $23,000 in credit card debt could save over $48,000 in interest with a debt management plan and pay off the debt much faster.
For Morris, having a clear plan and seeing progress each month, helped him stay on track and tackle his debt.
Starting a debt management plan could cause your credit score to drop at first, because they might require that you close some or all of your credit cards. But over time, as you make steady payments, your score should go up.
Do you have more information about this story? You can email me at jennifer.kraus@newschannel5.com.
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