Beating Broke

Is Credit Counseling Just a Fancier Version of Debt Collection?

May 22, 2025 By Teri Monroe Leave a Comment

Why you need credit counseling to manage your debt — Image Source: Pexels

If you’ve found yourself in a tough financial spot, you may be considering credit counseling. It’s easy to lump all debt relief services into one category. But credit counseling is much different than debt collection. They actually couldn’t be more different. Here’s what you need to know about debt collection and credit counseling to help you through your financial hardship.

Debt Collection

Debt collection has one goal: recovering money for creditors. They are hired by all kinds of entities, including banks, credit card companies, hospitals, and other lenders. If you haven’t paid your account for an extended period of time, you’ve probably heard from a debt collector. They usually are persistent and call you multiple times a day, email you, and send letters. Sometimes they even reach out to your family members. It can get pretty predatory. This is because they usually don’t get paid unless the debt is resolved.

Debt collectors are also responsible for reporting your debt to credit bureaus. This is why it’s important to monitor your credit score for any accounts in collections. They may even take legal action against you. Before it escalates, you usually can work out debt settlement or payment plans. If you are diligent, you can resolve any debts before your credit is affected. Remember, debt collectors must adhere to the Fair Debt Collection Practices Act (FDCPA). But their role is not to help you out of debt, it’s to recover money for your lender.

Credit Counseling

Credit counseling helps individuals manage their debt and improve their financial health. These services are usually offered by nonprofit organizations or certified credit counselors. They can help you with many things, including budgeting help, debt management plans, and further financial education. A credit counselor can also help review your credit report with you and plan on how to improve your score. Overall, they work for you and want to see you succeed. Their goal is to help you get out of debt. All of their practices are ethical but beware of for-profit debt settlement companies. They may charge hefty fees for services. make sure you choose a reputable agency that is accredited.

The confusion usually begins when a credit counselor sets up a debt management plan for you. With this plan, you’ll make monthly payments to the agency, but this money goes directly to your debt collectors. Remember, credit counselors are working for you. They may negotiate lower payments or interest rates and can help settle your debt for a lower amount than what you owe.

Why You Should Use Credit Counselors

You shouldn’t be afraid to contact credit counselors. They are not debt collectors and are your ally. Ultimately, they will help you better manage your debt and eliminate it. There’s nothing in it for credit counselors other than to help you through difficult times. Debt collectors, on the other hand, are working for someone else. Their only goal is to get your money, so they may be less likely to negotiate or help you through financial hardships.

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8 Payday Loan Horror Stories You Won’t Believe Are Legal

May 20, 2025 By Teri Monroe Leave a Comment

Payday loans are short-term, high-interest loans typically meant to be repaid on your next payday. If you’ve ever needed a payday loan, you probably know that some of their practices are predatory. Still, 12 million Americans take out payday loans annually. These loans often take advantage of individuals who are in a financial pinch and need money fast. Interest rates are astronomical, and missed payments can lead to financial ruin. So, it’s not surprising that there are many horror stories out there. Here are eight stories that we couldn’t believe are even legal.

1. College Student Misses 500% APR

One college student took out a $100 loan to pay for essentials during finals week. Unfortunately, the APR on the loan was 500%. The student didn’t read the terms of the loan. Payment was missed by one day, and the student owed $500 plus a $50 late fee.

2. Teacher Goes into Debt

According to NBC, one day, Jennifer Williams borrowed $200. Years later, she was still struggling to escape debt that she called “quicksand.” It took her 6 years to pay off her payday loan debt. She did this with the help of a local bank that offered financial literacy classes. At the end of the classes, she was offered a low-interest loan to pay off her debt.

3. Six Loans at a Time

Sandra Harris was in a tough time, and she turned to payday lending. After several rollovers, Sandra’s first loan was due in full. She couldn’t pay it off, so she took a loan from a second lender. Sandra eventually found herself with six simultaneous payday loans. She owed over $600 per month in fees alone, which wasn’t applied to her debt. Sandra was evicted, and her car was repossessed.

4. Single Mother Struggles

Lisa Engelkins, a single mother making less than $8 an hour, paid $1254 in fees to renew a payday loan 35 times. Lisa thought she was getting new money each time. In reality, she was only borrowing back the $300 she had just repaid. She paid renewal fees every two weeks for 17 months to float a $300 loan, without paying down the loan.

5. Payday Loan to Afford Medication

Meka Armstrong has struggled in a cycle of debt from payday loans for years. She first took out a payday loan in 2010 to cover the costs of medication she needed for her lupus. Meka said it is the worst decision she has ever made. She said that payday lenders even threatened to sue her and threatened her with jail time for nonpayment. Lenders also have customer’s bank account information.

6. Lying about What is Owed

One individual who took out a payday loan said, “I took out a $1500 loan, wrote two checks for $918. I have paid over $3000 on this. I asked what I need to pay to pay it off, and I was told the check amounts. Went to pay one off and would come back to pay down the other. I was told I had to pay $1300. I don’t have another $400 to add.” The worst part is that lenders can garnish your wages if you are behind on payments.

7. Repayment is Not Considered

Most payday lenders don’t consider whether you can feasibly pay back the loan. In fact, they don’t want you to be able to comfortably afford payments. Then, they make more money. Ed got stuck in this cycle. Ed said he’d been borrowing from various payday lenders for a number of years, and now his monthly repayments were often more than he was earning. He said that he’d complained to the lender about the 50 loans he’d taken out with them, but they said all the loans had been offered responsibly.

8. Communication Isn’t Clear

One individual in Oregon shared their experience with poor lender communication. They said, “I obtained a $300 loan from this company via Money Mutual. Since that time, I have paid a total of $1,295 for a $300 loan. I have no access to my records on their website, and no one at the company will speak to me, yet they continue to debit my account every other week.”

Avoiding Payday Loans

Ultimately, any other kind of loan is better than a payday loan. If you have bad credit, ask a family member or friend for help or see if you qualify for any kind of assistance. You don’t want to get caught in the payday loan debt cycle.

Should You Even Bother Negotiating With Credit Card Companies?

May 15, 2025 By Teri Monroe Leave a Comment

negotiate with credit card company — Image Source: Pexels

If you have an outstanding balance on a credit card, you may be wondering if it’s worth it to try to negotiate with your credit card company. The answer is, yes; it’s possible to negotiate various terms with your credit card companies. Especially if your financial situation has changed, for better or worse, this can help you negotiate. Here are a few times when you should negotiate and what you can expect.

When Should You Negotiate?

Credit card terms are never set in stone. They may be more flexible than you think. You can negotiate at any time with your credit card company, but certain factors can make you more likely to get what you want. Here are a few times when credit card companies are more likely to oblige your requests.

If You Have a Financial Hardship

You may need to call your credit card company if an unexpected financial hardship arises. Don’t just continue to miss payments. This could send your card balance into collections and impact your credit score. Most creditors will allow you hardship assistance of some kind. This negotiation is pretty standard and one you will likely receive if you pursue it.

You Have a Lumpsum of Cash to Pay Off Your Card

If you find yourself with enough cash to pay off your credit card debt, you may be able to negotiate a lump sum payoff. This is usually only when your account is overdue or in collections. Then, credit card companies or collections agencies may settle your debt for less than what you owe.

If You’ve Increased Your Credit Score

When your financial situation changes for the better, you should try to negotiate with your credit card company. You may be able to secure a better interest rate. If rival credit cards are offering a better rate, point this out. Asking for a balance transfer to another card with better terms may prompt your credit card company to match it. You have nothing to lose by asking for a few points off your interest rate percentage. This could save you hundreds or thousands of dollars in the long run.

If You Have Additional Income

Perhaps you’ve just gotten a new job and your income has increased. This is a good time to ask your credit card company for a credit line increase. Even if you don’t use the additional credit on purchases, having more available credit can help your credit score.

If You’re a Loyal Customer

Say you’ve been with your credit card company for several years. You can ask for better terms on your current card, like cashback or rewards. Most credit card companies will upgrade you if you ask. Additionally, if you’ve been hit with a fee, like a late fee, and it’s the first time, you may want to negotiate with your credit card company to waive the fee. If you’re a loyal customer who has always been in good standing, they are more likely to make an exception.

Have you negotiated with your credit card company? Were you successful?

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