Using a Debt Management Group to Re-establish Your Credit Standing
A debt management group, also known as a debt counseling agency, can help you if you now find yourself in a situation where you can no longer manage the debt you’ve accumulated. Once you talk to their specialists, you can start to make headway to reduce the amount you already owe and organize yourself financially. However, don’t fall into the mistaken notion that you will instantly be released from paying back most of the debt you owe. You still will be obligated to make payments for some time.
How Debt Management Groups Dispense their Services
Counselors who work for legitimate debt management groups usually negotiate debts so you are not paying as high of rate of interest to individual creditors or they will extend the terms of your loan in order to reduce the payment amounts. Once they talk to your creditors, they combine your obligations into one convenient monthly installment. In some instances, they can also negotiate away some of your balance and/or remove late fees that have been added to your account. Instead of paying your credit cards and other creditors directly, you will pay them a combined amount plus any fee they assess for their services.
Be sure to ask what your options are if you’re employment changes or if you’re unable to meet the plan that they devise for you. You want to be sure that you understand all of your responsibilities and obligations under their proposed plan. Some debts may not be eligible under a debt management group so be sure to give them a full list of all of your debts and full amounts so they can give you a complete picture.
Better than Bankruptcy
Make sure you understand the fine print of the terms of your agreement with any debt management group. In some instances, the company may pare off a portion of the amount owed to a creditor. However, be aware that by this kind of agreement can have a negative impact on your credit score. Consequently, any future loans you obtain may have to be secured at a higher rate of interest. Nevertheless, using a debt management group is still far more positive for your financial reputation than filing for bankruptcy, which can hurt your ability to obtain funding for a lengthy amount of time (up to 10 years).
There’s No Time like the Present to Reduce your Debt
Search online for a company. Make sure you check out the firm with the local Better Business Bureau before signing on the dotted line. Some debt management groups are owned by the credit card companies. You want to be sure you find one that is not affiliated with any credit card company. Non-profit debt management groups are your best bet for sound financial assistance. Once you partner with a company to help you pay off your debts, make sure you get into the habit of planning a budget and sticking with it. Learn from your experience so it doesn’t happen to you again. Take charge of your money and spending. If you’re presently over your head in debt, now is a good time to begin.
What Kind of Spender are You? Take the Following Self-Assessment Quiz and See
Do you struggle when it comes to spending and saving your money? Or, do you consider yourself to be someone who is good with budgeting what they make? Take the following self-assessment test and see where you rate.
(1) If I see something I like in the store that is on sale, which I hadn’t planned to buy . . .
(a) I still skip the purchase as it wasn’t what I had intended on purchasing.
(b) I don’t buy it because I basically can’t afford it.
(c) I buy it with my cash on hand as my current credit card is maxed out.
(d) Go ahead and put it on my card (after all, you only live once).
(2) When it comes to daily expenses . . .
(a) I keep track of them in a diary or on computer software.
(b) I can barely afford what I spend at the grocery store, so why would I keep track of expenses?
(c) I don’t keep track of expenses. I just charge items on my credit card.
(d) When I see something I like, I buy it – I don’t worry about trivial items like daily purchases.
(3) When it comes to emergency expenses . . .
(a) I have a rainy day fund that I can use if something unforeseen occurs.
(b) I keep my fingers crossed that I won’t have any emergency expenses. If I do, I’ll need to ask family and friends for a loan.
(c) I try to keep a few hundred dollars available credit on one of my cards in case of an emergency.
(d) I will rearrange other bills to pay for the emergency. It may mean paying my rent late, but a late fee is no big deal.
(4) When it comes to paying monthly bills . . .
(a) I calculate my income and lay so much aside for monthly payments.
(b) I am in dire need of a debt negotiation service as I owe more than what I make.
(c) Why use debt negotiation services? I’ll just file bankruptcy if my bills get out of hand. I just pay them when I can.
(d) I don’t keep close track of monthly bills, although I try to pay them by the due date. If I’m a little late, so what? After all, if I see something I like, I can put off paying a utility for a couple days.
So, how’d you do? If most of your answers were (a), you are a good budgeter. You’re not likely to run up your bills. Instead, you’ve learned to save so you can obtain items without the worry of going into debt. If you answered (b), you don’t entirely understand the how to save and spend your money. You could benefit from going to a debt negotiation service and being counseled and advised in this area. If you had mostly (c) answers, you are in denial about your debt situation and need the services of a debt relief company. Don’t even consider choosing bankruptcy as you won’t have the freedom to spend your money as you like for a period of ten years. If most of your answers were (d), then you also need a debt negotiation service to manage your spending and show you how to better budget your cash.