Martin Mathers asked:




While managing debt with additional loans and/or credit cards can certainly work, things can sometimes get to the point where you have to hold your hands up and admit that you need professional help. If you’ve let your debts and bills get totally out of control, it can often be hard to see a way out… and that’s where a debt management company can come in handy.

Unlike debt consolidation which leaves all of the responsibility in the hands of the person in trouble, a debt management company works with you to negotiate a plan with your creditors and reduce your monthly outgoings to something that you can afford. It’ll act on your behalf to show creditors the exact state of your income and how much is left over after you’ve covered essentials such as food and petrol, then break down the remaining amount amongst the people you owe money to in a fair and reasonable manner. They may also be able to freeze interest rates on anything owed, leaving you more room to pay off the balances rather than additional interest too.

Although some charitable organisations such as the Citizens Advice Bureau can help you put together a debt management plan, they can only offer advice on how to do it and not actually take charge of the repayments for you. A debt management company, however, can also handle all the payments to your creditors, taking all the pressure off you. Of course, this comes with the catch of having to pay a fee for the service, but the amount of hassle removed from not having to deal with creditors and only needing to make one monthly repayment can often be worth the money. The trick is to find one who’ll do everything on your behalf, won’t charge a fee until everything’s set up and have dedicated account managers who can help with any queries you might have – if you’re asked for money up-front just to receive advice, walk away and find someone else who can help you. Check the Office Of Fair Trading consumer credit register for details of worthy debt management firms, since all need to be regulated by it in order to remain in business.

The only other thing to consider is how debt management will affect your credit history; while it’ll certainly help you get out of debt, it’ll also be noted on your credit record and could potentially hamper your chances of getting credit in the future. It’s also important to note that while debt management is incredibly effective, some creditors may be unwilling to negotiate terms which could cause problems when trying to avoid court action over missed payments or money owed.

In Summary

A debt management company…

Is worth approaching if you’re struggling to cover your monthly debt payments Can negotiate with your creditors to reduce your debts significantly Should arrange a debt management plan to help keep your finances in check Will handle all your repayments, taking the stress out of your hands Is likely to charge a fee for representing you in dealing with creditors Shouldn’t be confused with charitable organisations offering financial advice!

Copyright: Individual Finance, 2010

Jorge

Mike Singh asked:




When you are experiencing a need, asking for help is not easy. When it comes to asking for financial help, it is even more difficult. Finances are personal and deciding that you need to talk to someone about the debt you have incurred is stressful enough without finding out too late that the company you chose is not a reputable business.

As the cost of living continues to increase, debt is keeping up pace as more and more individuals look to credit cards and loans to supplement their already slacking income. The result is that they are falling deeper into debt faster than they can climb out. What makes it worse is that many charlatans are taking advantage of the fact that when individuals feel the pressure of rising debt, they become vulnerable. Those who are looking to make a quick buck off others distress comes into play this moment. You are ready to seek help and they are ready to offer and take your money; leaving you in a worse financial condition than when you started. How can you tell the charlatans from the legitimate debt management companies?

To begin with, it is very important that you research the debt management companies you are considering. Talk to others who have used their services, call the Better Business Bureau to inquire as to the company’s business practice. If you have concerns at all, do not use them. If you have narrowed your search down to a few companies, talk more in depth with their counselors. Be inquisitive ask many questions such as:

* Will all of the monthly payment be applied to your creditors

* Will any portion of what you pay to the company to into their pocket before going to your creditors

* Are there any hidden fees

These questions are very important because that is how the less reputable companies are making a profit from your financial difficulties. They will pocket the first payment you make without ever sending it to the creditors. Or they will only send in a portion of your payment. If this happens you will most likely be facing penalties and finance charges for not making the agreed upon payment. It is vital that you know up front how much of each monthly payment you make will be applied to your debt. The majority of debt management plans will tell you that it can take anywhere from three to six years to get out of debt. If you inadvertently work with a company who does not have your best interest in mind it will take several years longer. Be wise, do your research, and read the fine print before making your final decision. Not all debt management companies are looking to defraud you but it takes only one to ruin your credit.

Billy