Debt management involves a third party assisting a debtor in settling his debt with a lender. For example, if you get a loan from the bank, you can avail of the services of professional debt relief companies to help you pay the amount back in a more manageable way. This is a great option if you're undergoing a financial crisis, or if you're simply too busy or too uninformed to properly manage your debts. A lot of companies that offer credit counseling may also provide debt management services, lifting you out of heavy debt and fixing your damaged credit situation.
Debt management begins with compiling a list of the amount of money you owe to each of your creditors. This is done because not all debts can be handled by a debt management plan. This includes certain creditors, car loans, home loans, and other secured debts. The list will help you weed out the ineligible creditors so that you can avoid any confusion later.
Once the list is done, debt relief companies will then add up all your income and expenditures. This way, you'll be able to see the maximum amount you can allocate for repaying your debts. The companies will also try to settle a few of your debts and lower any interest rates they can. They might even be able to exclude interest in some cases. Keep in mind, however, that taking advantage of a debt management plan will affect your credit score, and you may be unable to get additional credit for a while. Also, you may not be qualified for a debt management plan in the first place if you have less than $10,000 in debt. Debt management is meant to solve only the more serious debt cases. If you are indeed in heavy debt, then you may consider debt elimination services.
Debt management gives you more than one option to settle your debts. For example, consumer debt consolidation allows you to compile all your debts into a single package. This is a lot easier to deal with, especially if you've got quite the number of debts to settle. Consult debt relief companies and other American debt solutions for advice on how to best deal with your debt.
With the change in US bankruptcy laws in 2005, a lot of people must seek a long-term debt management program to handle financial troubles, as filing for personal bankruptcy is no longer an option. You may be one of the unfortunate few who are forced into using a debt management company's services. You've still got to be careful, however, when looking for professional debt management. Before coming to an agreement, check to see whether or not the company is registered with the Better Business Bureau. You should also make sure that the set up fees of your debt management program are reasonable and realistic. You can expect a nominal rate for any debt management services you may avail of, but the amount shouldn't be based on a percentage of your debt. It shouldn't even be a regular monthly charge. Remember, debt management is supposed to get you out of debt, not pull you in deeper.