The Truth Behind Debt Management
There are a lot of misconceptions about the debt management industry, leading people on to believe that they can become debt free, no matter what situation they’re in. Likely, you’ve seen commercials from companies that offer consumer credit counseling services, but not everyone is eligible for their help. If you don’t have significantly damaged credit report with high debt, then you’re likely to be turned away, as though you’re not good enough to help.
Debt is debt and when you are at a point where you can’t pay off your debt and it continues to grow, then you’d expect the same services as the next person. The only thing you can do is attempt to clear out the debt yourself or wait until it gets so bad to where credit counseling companies will extend their services to you.
Debt Management Companies
You’ll find debt management companies virtually everywhere. You see them advertised in newspapers, magazines, television and the Internet. They work by negotiating with your creditors, so that you’re able to make one low monthly payment that is spread amongst all of your creditors. The debt management companies also help you to get a lower interest rate. Unlike with debt consolidation, this isn’t a loan. A lot of people get confused between debt management and debt consolidation. Since their emergence, they have become a popular source for getting rid of debt.
Be wary though that companies that offer to manage your debt will charge you a hefty price, which is why you should shop around thoroughly before hiring one. Also, if you try to apply for a loan (VA, FHA or conventional), you will be treated the same as a consumer who has filed for Chapter 13 bankruptcy. Keep that in mind as you’re looking around for ways to eliminate your debt.
Debt Relief Options
Debt management services aren’t the only way to diminish the debt you have accumulated. You have other options that you can choose from. One option that is free, but takes a lot of hard work is managing your only finances. This means getting everything together and figuring out how much money you owe, to which creditors and how much money is coming in and out of your household. During this time, you’ll need to set up a budget plan that will enable you to make payments to your creditors, who you should have already contacted to set up payment arrangements. You’ll also have to cut our expenses that aren’t necessary, at least until you have paid down your debt to a reasonable size.
Another debt relief option is to use debt consolidation services. This can be obtained from a bank or other lender that offers this service. If accepted, you will receive a loan for the amount of your combined debts, so that they can all be paid off at once. Then all you have to worry about is paying off that one loan.
A risky way of getting rid of debt is using a balance transfer credit card, which is used to pay off other debts. If you’re not careful, this could end up putting you deeper into debt. Some people use regular credit cards to pay off their debts. Either way, you’ll have interest rates to deal with that are making it harder to pay off.
Choosing a Debt Relief Company
Whatever type of service that you choose for your debt relief, make sure that they are licensed by the state to provide such services. You should also work with a company that has been around for a few years. There are a lot of fly-by-night companies that prey on desperate consumers who need debt relief. You’ll find Internet debt relief companies and local service providers, but it is up to you to do your due diligence about the company beforehand. Find out what other customers have to say about their services and ask about their success rate. For some companies, their failure rate is at 70%, which is pretty bleak.
Staying Out of Debt
After getting the debt relief that you need, it’s important that you continue practicing good debt management skills. Learn from your past mistakes and avoid putting too much on your plate at one time. You can also avoid having too many creditors, so that if you lose income in your household, it won’t leave you collecting debt. There are a lot of prepaid services that you can use instead of contract based services that have long terms.