Debt management services usually come down to debt management and debt settlement, which are often used interchangeably. If you want a precise management plan that will help you get rid of credit card debt, you want to work with financial institutions such as debt settlement companies. They are the ones that offer debt management services to help you pay off your debt easily and with minimal stress. Debt consolidation loans can be a life-changer when it comes to debt relief. At the end of the whole process, you should have lower monthly payments and lower interest rates. This is what debt management companies can do for their clients, but that’s not the whole story. To fully understand the whole process, we must take an even closer look at it.
What is debt management?
They are easy to confuse, but debt management and debt consolidation are two different things. Debt consolidation can be achieved through an individual effort by taking a new loan from your bank and paying off your other creditors like credit card companies with it. This requires you to follow a strict debt management plan and stay very disciplined throughout the process.
If you trust a company to enroll you in a debt management program, you authorize it to pay your creditors on your behalf. If you made the right choice, your monthly payments could be brought down to a third of their value, while also having a clear plan for full debt relief in a few years and you could even save money.
Whichever option you go with, you should know that both are viable and very productive. Over time, debt settlement on the amount you owe has proven to be a viable way to aggressively erase debt in three to four years. This process can sometimes be 3-4 times longer if your minimum monthly payments stay at the same rate and you don’t negotiate your loans.
How can debt management benefit you?
If you are in a situation where you aren’t satisfied with your personal finances, debt management services could give you some breathing room. Debt management companies offer debt solutions and work to reduce interest rates and pack all of your monthly bills into one single payment that is adequate for your current financial situation. This will be followed up with a clear plan to pay off your debt in the long run. Not only do you have fewer things to worry about every month, but you are also on your way to becoming debt-free.
Even in situations when you are deep into credit card debt, one counseling session with the right company can make you look at debt differently.
Who should use debt management services?
Before you consider using debt management services, you should understand that it is usually a viable option for unsecured debt. This includes medical bills or any other loan debt that doesn’t include collateral. A mortgage or a car loan are good examples of secured debt, where collateral is involved, and you can lose your house or car if you are late on your monthly payments. A student loan is usually ineligible for debt management plans, even though it is unsecured.
How does the whole process work?
Once you have determined which debt management company you want to go with, your payment schedule will be reorganized and adjusted to your current financial situation. The company becomes your new creditor and works to negotiate lower fees and interest rates with your previous creditors. In some cases, your total debt could be a lot lower with good negotiations between the company and your creditor.
This is not only a good way to deal with debt but also a way to get more breathing space, in a financial sense. When your monthly bills are all combined in one single payment, you will have more time for yourself and fewer reasons to be stressed about your debt.
The end goal of this process is to have to pay less on a monthly basis but also to avoid a debt snowball, which is always a possibility. With clear and precise monthly debt payments, you will be well underway to financial recovery and debt consolidation.
How to find the best debt management companies
This part can be tricky because there are a lot of scammers involved in the industry. In general, your debt management company should have low fees, be as transparent as possible, have a good reputation, and offer extensive customer support. Accreditations aren’t easy to get in this line of work, so you should look for companies with a great Better Business Bureau (BBB) score.
A few more accreditations that are worth mentioning:
- National Foundation for Credit Counseling (NFCC)
- Association of Independent Consumer Credit Counseling Agencies (AICCCA)
- Council on Accreditation (COA)
- International Organization for Standardization (ISO)
Apart from accreditations, you should also look for longevity and capability. If your credit counseling organization can’t handle a variety of debts they are probably not worth your time.
How to avoid scams
There is no simple solution to this problem, but there are some common ways to figure out which companies aren’t worth your time. If you are initiating the contact, you are in full control of the situation. Don’t be afraid to ask questions and try to get as much information as possible.
- Are the fees transparent?
- Do they have enough experience in debt management?
- Are they offering financial counseling first?
All of these are very important questions because you have to be familiar with the fees that are included in the process, but you also want an experienced company and debt counselor understanding your credit history and handling your debt. It is important to know that counseling should always come first because the company needs to understand your debt in order to be able to consolidate debt.
This should be more than enough information to get started with debt management. It can be a very useful tool if you have enough discipline, money management skills, and patience to chip away at your debt over a longer time period. If you are coping with debt, getting familiar with debt management could be a good idea. A personalized loan could be the type of financial aid you are looking for.
Whatever the case may be, keep in mind that you should always start with counseling, and if you do need some, feel free to request it on our website.