5 Things to Remember About Debt Management

January 27th, 2010 | by Admin |

Debt management companies advertise aggressively on TV, radio, the Internet, and in newspapers. Many of these companies promise the moon and the stars when it comes to debt reduction. Before signing up, here are five things to remember about debt management.

  1. Debt management companies can help you with credit card debt, but you’ll pay a lot of fees. Generally, you’re required to sign up for a debt reduction plan that involve making regular payments to the debt management firm. The debt management company negotiates lower payments or a payoff amount with your creditors, and makes the payments to them.
  2. Not all debt management firms are working in your best interest. Some people have ended up deeper in debt because the debt management company never made payments to their creditors. Before signing up with one of these companies it’s important to find out whether or not your money is put into an escrow account and at what point payments are made to creditors.
  3. Just because you choose to work with a debt management company or get debt counseling doesn’t mean your delinquent account won’t be turned over to a collection agency.
  4. You can put together your own debt management plan. Sit down and review your income and expenses to determine exactly where your money is going. Then work like crazy to cut out unnecessary expenses. Pack lunches, skip eating out, cut the cord on cable or cell phones. Do whatever you have to to find money to put toward a debt reduction plan.
  5. You can negotiate a debt settlement on your own. If you’re already behind on payments for credit card debt and other loans, contact your creditors and get ready to negotiate. Explain that you are going through difficult financial times and need help with debt. Be willing to offer a lump sum payment out of your savings or ask for a new payment plan.

Getting the right support can be the key to getting out of debt. Find a debt support group or nonprofit credit counselor that offers free or low-cost help with debt.

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