You may be seeing the term debt management coming up in ads, commercials, and in other contexts.
It is tossed around casually, but actually refers to services offered by companies who work in similar ways to debt consolidators.
They work to help get you out of your current debt and you make one payment, instead of multiple ones to various creditors.
People who have high credit card balances and diminished resources or insufficient funds to ever pay off their credit card debt look to debt management to see if they can create a better financial future.
With any loans and contracts, you are in a buyer beware situation.
You need to evaluate the best company, terms and conditions, and rate for your situation.
That is how debt consolidation and debt management are alike.
Where they differ is that debt management companies offer credit counseling.
They work with individuals to analyze why the debts occurred.
What are temptations and solutions? They teach budget setting and techniques to stay within that budget.
Debt management companies work with your creditors to lower the amount of money that you owe.
You pay the company a monthly payment and they pay your creditors the new payment rate that they negotiated for you.
Most companies set up plans to get you out of debt within 5 years.
That sounds very positive; what are the negatives? You must do due diligence to separate the scam artists and the better companies managing debt.
Otherwise, you could face some unpleasant repercussions.
If you do not understand the exact date that the debt management group begins paying your creditors, you could miss payments.
If there are hidden charges or interest rates are subject to raising without notice clauses in your contract, you could pay far more in the long run.
What if they do not pay your creditors and you still pay them? The biggest concern to take into account, though when considering debt management is how it will affect your credit rating and credit history.
If you decide to work with a company and they negotiate lower interest rates, lower payments, and arrange to reduce your credit card debts, this is viewed by secured loan creditors and banks or by anyone lending money, the same as if you had filed Chapter 13 bankruptcy.
Your credit score will be seriously compromised and your accounts will show that they were paid at reduced rates by a DMP (debt management program).
That may or may not outweigh getting out of debt within five years.
Only you can decide.
It is tossed around casually, but actually refers to services offered by companies who work in similar ways to debt consolidators.
They work to help get you out of your current debt and you make one payment, instead of multiple ones to various creditors.
People who have high credit card balances and diminished resources or insufficient funds to ever pay off their credit card debt look to debt management to see if they can create a better financial future.
With any loans and contracts, you are in a buyer beware situation.
You need to evaluate the best company, terms and conditions, and rate for your situation.
That is how debt consolidation and debt management are alike.
Where they differ is that debt management companies offer credit counseling.
They work with individuals to analyze why the debts occurred.
What are temptations and solutions? They teach budget setting and techniques to stay within that budget.
Debt management companies work with your creditors to lower the amount of money that you owe.
You pay the company a monthly payment and they pay your creditors the new payment rate that they negotiated for you.
Most companies set up plans to get you out of debt within 5 years.
That sounds very positive; what are the negatives? You must do due diligence to separate the scam artists and the better companies managing debt.
Otherwise, you could face some unpleasant repercussions.
If you do not understand the exact date that the debt management group begins paying your creditors, you could miss payments.
If there are hidden charges or interest rates are subject to raising without notice clauses in your contract, you could pay far more in the long run.
What if they do not pay your creditors and you still pay them? The biggest concern to take into account, though when considering debt management is how it will affect your credit rating and credit history.
If you decide to work with a company and they negotiate lower interest rates, lower payments, and arrange to reduce your credit card debts, this is viewed by secured loan creditors and banks or by anyone lending money, the same as if you had filed Chapter 13 bankruptcy.
Your credit score will be seriously compromised and your accounts will show that they were paid at reduced rates by a DMP (debt management program).
That may or may not outweigh getting out of debt within five years.
Only you can decide.