Debt Management Companies
Are you overwhelmed with high-interest credit card debts and looking for a proven way to get relief - and perhaps considering the assistance offered by debt management companies? If so, you are not alone. In Indiana as well as in other states, many consumers are similarly facing their own debt crisis and are looking for a proven way to reduce their credit card debts and other personal unsecured debts (like medical bills, gas charges, or even department store charges).
Fortunately, for many consumers, there is help available in the form of debt management (or debt consolidation), debt settlement, or even bankruptcy. Debt management typically involves combining, or "consolidating," your debts into one, more affordable, and more manageable payment made to a credit counseling agency or debt management company.
On the other hand, debt settlement is a process where you are hoping to settle or negotiate with creditors for substantially less than the actual debt amount. Both options have become popular alternatives to bankruptcy, which is also a form of debt relief - but one that can have a more damaging and longer lasting effect on personal credit.
Compare your debt relief options. Receive a free debt relief analysis and savings estimate - at no obligation to you.
What is Debt Management?
As mentioned earlier, the goal of a debt management plan, or DMP, is to combine or "consolidate" your unsecured debts into one, more structured, and more affordable monthly payment made to a credit counseling agency to distribute to individual creditors. Let's say you want to enlist the services of debt management companies and you enroll in a debt management plan - here's what you can typically expect:
A credit counselor will review your financial situation, debts, and overall ability to pay back those debts. Then, your credit counselor would typically create a strategy to help reduce those debts. He or she would submit proposals, on your behalf, to creditors requesting lower interest rates, elimination of late fees or other penalties. Creditors that agree to the proposals are normally placed into the debt management program or plan.
With a more structured and more affordable repayment plan in place, you can, hopefully, pay your debts sooner than if you continued to make the monthly payments on your credit cards at higher interest rates. However, it's important to understand that while companies that offer debt management can typically help many consumers reduce their debts, a DMP does not make your debts magically disappear.
Credit counseling agencies, in general, submit proposals to creditors and disburse those funds to creditors, but it is still your responsibility to make sure that money is available in the account set up for your monthly payment.
How Debt Settlement Works
For many consumers, debt settlement is another viable debt relief option to help reduce credit card debts. If you're in a similar situation, it is wise to understand how this option works. Unlike debt management where you are typically paying off the entire amount of your credit card debts, with debt settlement, you are hoping to settle or negotiate with creditors for significantly less than what you owe.
Today, more than ever, credit card companies may be willing to negotiate with consumers who are struggling with credit card debts. In many cases, creditors that sell off what they might consider as "bad debt" to third-party collectors might only receive 10 cents to the dollar. As a result, creditors may consider negotiating with consumers who are struggling with debts but have saved up funds to make a reasonable settlement offer.
However, there are potential risks involved with debt settlement. As the term suggests, debt settlement involves negotiation - credit card companies are certainly not legally required to settle with you. Also, debt settlement firms typically advise consumers to stop making their credit card payments in order to accumulate funds, over a certain period of time that they can use to make a reasonable settlement offer.
In many cases, creditors may threaten to sue consumers that default on the terms of their credit card agreements. In addition, many consumers who default on the terms of their credit card agreements will see a decline in their credit scores.
In spite of the potential risks involved, debt settlement remains a popular debt relief alternative to bankruptcy - which, for many consumers, is typically the option of last resort and one that has a more negative and longer lasting impact to one's personal credit.
Debt Management Companies and Other Options
The bottom line is; if you are overwhelmed with debts and are seeking relief, there are options and help available - whether you get assistance from a debt management company who offers debt management plans (or debt consolidation) or debt settlement.
Start here to request a free debt relief analysis and savings estimate - at no obligation to you.