Struggling mightily with your debts, you need professional help. Fortunately, you do have options, including debt management. You may be wondering how the financial strategy works and what you can expect from debt management. We cover all that below.
What is Debt Management?
Let’s start there. With this method, you use budgeting and financial planning to get your unsecured debt reined in — then erased entirely. It’s also used to manage any new debt like credit cards and personal loans. Debt management is usually facilitated by a certified credit counselor.
Am I a Good Candidate?
You are if you’re having trouble keeping up with your debts, but you still have cash left over after regular living expenses are paid. Debt management may also be for you if can see yourself ultimately paying the entire amount owed. That’s as opposed to a strategy such as debt relief, in which you’re so behind in your payments that you’ll never catch up. For that financial approach, check out Freedom Debt Relief reviews @ bills.com.
How Does Debt Management Work?
While you can handle it yourself, it’s best to let a pro help. That’s where credit counseling comes in. Such a counselor will assist you in crafting a plan to pay off your obligations in three to five years and can negotiate a debt repayment plan with your credit card companies or other creditors.
In general, your counseling session will last about a half-hour. During this time, you’ll establish a budget, find out how to carefully manage money, and produce an affordable monthly payment amount.
To help you avoid getting in more debt, you may have to close each card account once it’s paid off. You’ll also have to make every monthly payment because if you don’t, you’ll be bounced from the program and back at square one.
Will Debt Management Hurt My Credit?
If your company negotiated a new payment schedule, your credit scores will be temporarily affected because those payments will be less than what you contractually owe. Despite the plan, the companies you owe may still proceed with debt collection.
Once you’re done with the program, however, your scores will nicely rebound.
How Much Does Debt Management Cost?
Many are free but some do charge a fee, which is typically folded into the monthly amount you pay your debt management firm. Try to use a free one so that all your cash goes to your debts.
How Do I Find a Company?
Before settling on a company to help you, you should do some research. Find out if your agency considers whether some other option might be better for you than debt management. You also want to know whether fees are involved and, if so, whether they’ll be part of your monthly payments.
Also, be sure to find out what happens if your situation changes, and you must cancel or modify your plan. For example, ask whether you’ll be charged a fee.
In addition, is the agency accredited, and is it a member of a trade organization? Websites for the Association of Independent Consumer Credit Counselors and the National Foundation for Credit Counseling can line you up with an accredited and established agency.
You should also find out how successful has the company been with other customers, and what kind of financial education will you get.
What can you expect from debt management? Now you know. It’s a financial solution that has put scores of consumers back on the right track. See if it’s right for you.