Debt Management Companies. What You Must Know About Debt Management Companies.
It has become all too commonplace for consumers to find themselves in a difficult, if not seemingly impossible, situation when it comes to debt. Loans, medical expenses and credit card debts can build to the point where the average consumer just can't keep up the monthly payments.
In these cases, most consumers will seek help from certified debt relief agencies to handle debt resolution and credit solutions. While this may lead to one of several possible strategies, which credit-yogi can consult you on, it is becoming more and more ordinary for consumers to enter into a Debt Management Plan (DMP).
Debt Management Plans are structured for the consumer by debt management companies. The consumer usually cannot structure such a plan on their own.
The debt management company can arrange for many advantageous techniques that the consumer may not be able to find for themselves. The reputation of the debt management company and their ability to provide a professional buffer between creditors and consumers are desirable factors to the creditors.
Debt management companies can also bring what is in effect group buying power by representing a group of consumers to each creditor rather than just individual consumers. This should convince the creditor to restructure the debt in a more forgiving way so that they are sure to get at least something back on their original loan or line of credit.
Credit-yogi.com insists that Debt management companies should offer at least the following services:
- A free initial consultation to determine the financial status and needs of the consumer. Budget counseling should be given to the consumer at this consultation to help the consumer to become debt free. Follow up consultations should be readily available, although these may be on a fee basis.
- Creation of an account for the consumer such that the consumer makes one monthly payment to the debt management company, which in turn pays the individual creditors (in addition to keeping a management fee).
- The debt management company should negotiate with all creditors to insure that they are willing to accept payments under a Debt Management Plan.
- The debt management company should negotiate beneficial modifications to the debt with each creditor. These should include a waiver of late fees and penalties, a reduction in interest rate, and having the account re-aged, meaning that the effective date of the debt is moved from the original date to the current date. This lets the record start fresh.
- The company should handle the accounts with the individual creditors and prevent harassing phone calls to the consumer.
- The company should keep all consumer information secure and private.
There are some key things to be aware of when choosing and dealing with a debt management agency to achieve debt resolution:
- Debt management agencies can be either for profit or not for profit. This will of course affect the fees you will pay. Not for profit agencies are not government agencies, but are rather supported by the credit card companies and other creditors because of their good relationships with those creditors.
- There are companies that claim to be not for profit but are really for profit. Beware. They could me trying to trick you into thinking that their fees are the best that you will find, when they're probably not.
- You most likely will not want to deal with an agency that won't put everything in writing. Carefully review the written contracts and make sure that they represent what you think you are getting.
- Watch for companies that try to tack on special filing fees, analysis fees, or any other kind of fee that is not part of an overall written contract. Check with the Better Business Bureau or someone who can give testimonials. These are not guarantees of a good debt management company, but they could help warn of a bad one.
Entering into a Debt Management Plan is a big financial step. Credit-yogi.com can help you take great care every step of the way, and check the progress of the plan every month. You will be making great strides in your effort to become debt free.