You can certainly deal with debt on your own, which we believe is always the best and cheapest solution. But for many folks, their financial burden may be so far along that they feel that they could benefit from bringing in outside support. Some others are more comfortable about having a “professional” help them resolve their problems.
Given that tackling a heavy debt load can be an overwhelming process for some people, these folks may feel that they have little choice. Note though, that if you’re looking for assistance, there are lots of debt relief companies out there. There are many debt management programs available, and a good number of them use online means to get their points across. Seeking help or using a professional debt service to get rid of a difficult problem will come at a cost; the question here is whether these avenues are worth pursuing. What do you get by seeking debt help? Let’s take a closer look at one of them, CareOne Debt Relief Services. This is one company we’ve seen advertised quite a lot on television lately.
According to this debt relief company, they’ve helped more than 4.5 million people with their debt issues. If you have more than one unsecured loan and you’re finding it difficult to keep up with loan payments, then as a debt service company, CareOne can review your situation and suggest a debt relief plan and a provider to help you carry out that plan.
CareOne Review: Professional Debt Relief Services
If you visit their site, you’ll find that CareOne is quite comprehensive — they present free resources to help you manage your debt, as well as paid services for those who want the extra assistance. Let’s start with their paid programs.
#1 CareOne Debt Management Plan or DMP
Chief among these plans is the DMP, which is really a debt consolidation program that will:
- Replace all your debt payments with one convenient monthly payment.
- Yield loan interest rate reductions and the elimination of fees, potentially leading to savings.
- Bring your account current. Most creditors that CareOne works with will re-age you account after receiving 3 consistent payments. This means that your accounts, which are past due, will be marked as current.
This service is helpful to someone who is having trouble with paying their bills regularly. Under the CareOne Debt Management Plan, you send ONE monthly payment to your CareOne provider, who will then distribute your money to your creditors. Your provider makes arrangements with these creditors so your interest rates are lowered and you stop picking up late fees. Your ultimate goal is to pay off all your debts as efficiently and as quickly as you can.
Costs and Benefits of CareOne’s Debt Management Plan
It can take as long as three months for your plan’s arrangements to come to pass — after three payments, CareOne assures its clients that creditors would be more willing to negotiate with them, and may work out improved rate terms as well as adjust late/missing and other fees that are applied to monthly payments. Creditors may be more willing to adjust your payment schedule and debt obligation if there is a cooperative environment under which payments are made. If you are in this boat, you should receive an email from your CareOne provider to let you know about these adjustments to your plan. It may help your credit history if you are proactive and are able to honor your due dates as it pertains to your monthly DMP payment. But also be aware that not all creditors will be flexible. There will be those that may not agree to lower your interest rates. By your fourth month on the DMP, it would be natural to expect to see your balances drop. A typical debt management plan may take around five years to complete.
A debt management plan like this can be a convenience to you because you no longer have to worry about making separate payments to each of your creditors. Instead, the process is simplified with one monthly payment to CareOne. Once all the arrangements with your creditors are complete, you shouldn’t incur any more late fees, either.
What about the savings? CareOne has established relationships with creditors so they can work out a new arrangement in your behalf, thereby reducing loan fees and rate charges. They will negotiate with your creditors and credit card companies. It is important to note that different creditors are treated differently, and payment details vary by creditor. For instance, there are certain credit card companies that may actually lower their rate charges to as much as 6%, while other stick to 12% to 15% APR.
Additional benefits of the DMP include debt counseling from CareOne’s certified counselors. As an incentive to keep up with your monthly payments, there are monthly and quarterly drawings for different prizes.
How Does CareOne Charge For Their Debt Consolidation Service?
While we’ve described the positives of this plan, it’s much more helpful to check out concrete numbers. How does CareOne charge for the DMP? They are very specific about stating that the fees involved are different according to regulations set forth in different states. There is a one time activation fee as well as a monthly fee that ranges from $20 to $50 that varies per state.
One more CareOne benefit: they DON’T charge a prepayment penalty, unlike some debt consolidation companies. In fact, they actively encourage that you try to pay down your debt faster by hiking your payment amounts per month. Pay extra to finish your debt payments faster. This is one aspect of CareOne that I like — they’re after your best interest by supplying you with tools, advice and education to help you vanquish your debt.
Is Debt Consolidation Worth It? Do The Math.
You’ll have to add up your interest charges, late fees and costs to see if you’ll save money with this service. A quick example can show you where you’d break even.
Example. Suppose you have 3 credit cards which altogether add up to a balance of $3,500. If you’re paying $175 a month on your cards, then opt to go with a DMP, your payments may be lowered to $140 a month (including the cost of the DMP). If your DMP charge is $30, then $110 will go to your creditors. If your APR is reduced to 10%, it’ll take you 3 years to retire your debt. By contrast, at the standard credit card interest of 20%, your original $175 a month would retire your debt in 2 years or so. As you can see, your savings (if you receive any) and the length of time it will take to eradicate your debt will be based on the interest rate you set and how much you decide to pay per month.
You’ll have to calculate the numbers for your particular case, to see if you are indeed going to save this way. Things may end up a wash, but you could still benefit from counseling and the convenience of a single payment and a disciplined program.
How Does A Debt Management Plan Affect Your Credit?
Interestingly, the effects of a DMP on a client’s credit cannot be predicted. Some clients start a DMP with terrible credit scores and emerge with better scores, while the opposite happens to others. Each case is different. If a client ends up with worse credit than when they started, it could be due to account closure under such a plan (because a prerequisite of the plan is to avoid incurring more debt). For those who improve their credit, it may be because they are now able to keep to a consistent payment schedule and are avoiding missed or late payments.
Some creditors will report that you are under the services of a debt management company. While this won’t affect your credit rating, it may still affect your capability to get financing. If this is the case, you may request CareOne to provide you with a loan letter that can vouch for your “good behavior” as a responsible bill paying client.
#2 CareOne Debt Settlement Plan
A second debt relief plan is the Debt Settlement Plan. You might be offered this plan if the monthly payment for the DMP is out of your reach. Debt settlement is typically considered the final step you can take before declaring bankruptcy. But like with the case of debt consolidation, you’ll need to perform a cost/benefit analysis to determine if you should proceed down this road.
Here’s how it works: You will need to STOP paying your bills to your creditors; your loans will show delinquency. With no payments being made, your accounts will be passed to debt collection agencies. By settling this debt, however, you won’t have to deal with collectors — CareOne will do the work for you. But you’ll continue making monthly payments to an escrow account, which CareOne will administer. Your payments stay here until CareOne can negotiate a smaller amount for you to pay. So your provider contacts your creditors to see if they’ll settle your accounts for a percentage of what you still owe. You might end up paying as little as half of what you originally owed over a time period of up to five years. For this service, CareOne will charge you one fee, called a Success Fee, which is 30% of the settled amount.
Here’s an example. Suppose you have a credit card balance of $15,000, which you settle for $7,500. You will then have an outlay of $7,500 plus $2,250 (Success Fee: 30% of $7,500) for a total of $9,750. You will thus settle for less than your full balance while avoiding bankruptcy. While this will affect your credit, you can get back on track more quickly.
Be aware that a debt settlement can make your credit history look negative.
#3 Bankruptcy Options & Services Recommended By CareOne
The third debt relief plan that CareOne may offer you is the bankruptcy option. If you lack the means to pay off your debt, then the company may suggest a law firm so you can pursue bankruptcy as a solution. Bankruptcy is a big step though, so make sure you carefully learn what the process entails before going down this route. See these ways to avoid bankruptcy.
For your CareOne plan, the fees you’ll be charged depend on how many creditors you put on the plan and your state’s regulations.
Helpful Debt & Credit Counseling Resources From CareOne
CareOne has a substantial Community section and a lot of free resources and material that you can learn from, even if you decide to go with a DIY approach to debt elimination. CareOne’s Community section has forums, blogs, and groups. Anyone can be a member of the CareOne Community. You can open a free community account and there’s no need to sign up with CareOne’s debt services to peruse the site’s other services and features.
In the forums, you can engage the community with your debt topics or you can ask a CareOne expert various questions. The blogs provide posts on subjects such as dealing with debt as an entrepreneur, customer’s personal stories, and getting financially fit. There’s even a Debt Diva with tips on how to spend less while managing your debt.
There’s a Tips and Tools section, too. It’s loaded with helpful items like free webinars, newsletters, downloadable guides and articles. For money management tools, you can select among calculators, a budget planner, and a learning center. And the Tip Jar has advice so you can save.
When you’d like to keep up with your account on the go, there are CareOne apps for the iPhone and Android. You can see a snapshot of your account, your balances, and even graphs. These apps are free for members to use.
Even though it’s possible to tackle your debt at your own pace, some people just prefer the assistance of a debt services program. If you’re in a situation where you could benefit from this type of assistance, see if CareOne is right for you.
Created March 3, 2010. Updated November 9, 2011. Copyright © 2011 The Digerati Life. All Rights Reserved.