Keys to a Debt-free Life: The Debt Management Company

Being heavily in debt is no one’s idea of a pleasant experience. If you find yourself in this situation, you’re probably looking for a way out. A debt management company may just be what you need to free yourself from debt. 

Debt Companies in A Nutshell

For a price, these companies work by handling your debts, analyzing them and working out a plan that works for you and your creditors. Typically, the client will pay or deposit money into accounts with the debt company who will then allocate the funds to the creditors accordingly. Take note though that these agencies typically handle only non-priority and unsecured debts.

Why You Should Consider Debt Management

There are several reasons why using debt management services may be beneficial to you. First of all, they discuss with your creditors about your debt and the possibility of making allowances in payment or deductions in the interest rates or other fees. If the company you chose has a good reputation, it is very likely that your creditors will be willing to cut interest rates. Keep in mind, however, that the amount that is waived from your debt is usually considered as income on your tax returns. 

 Another benefit a debt management plan gives is the decrease in effort you have to put in. All you will need to do is deposit your money in the account and the company takes care of the rest, including dealing with creditors. 

Finding a Reputable debt company

Friends and relatives who had the same dilemma may have had experiences in dealing with management companies and may be able to suggest a dependable one. 

If you have a company in mind, visit or call them for a free consultation. This will let you get an idea of what to expect from them and how much they can actually help you. Remember that a good debt negotiation agency will be considerate of your needs, questions and concerns. While you are there, don’t forget to ask how much they charge and if there will be additional charges later on. 

Check with the Better Business Bureau about the company’s client track record. Go for a company that has been proven to successfully lower their customers’ debts. A red flag you should watch out for is a history of unresolved complaints. 

Caveats when dealing with third party companies

In dealing with these agencies, there is a tendency for your credit rating to suffer. This is because when you stop paying creditors as your debt settlement company has advised, creditors will alert the credit bureaus of your non-payment. To avoid this, continue paying your bills until the debt negotiation agency has started paying the creditors.  

Take note of the fee the company charges. Some take the first deposit you make as their payment and/or take certain percentages each month. Some also ask for exorbitant fees from the start. 

Be wary of companies who insist on having all of your creditors included in your management plan. This may just be an attempt to get more money from you by managing more accounts.

Also be cautious if a company asks for specifics like your social security number or personal financial information before they give you a price quote. There is usually no need for them to know these.

Know that a debt management company is only one of the many options that are available for people in debt. If you don’t think that this is the best option for you, there are others you can consider. 

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