Utilize credit card debt management services when your unsecured debt becomes unmanageable.
Credit Card Debt Management Services Explained
Sometimes debt simply becomes overwhelming. For some consumers, it is bad financial management that lands them in trouble with debt. For other consumers, the loss of a job or an unexpected health crisis results in bills going unpaid. Whatever the reason, these services are designed to assist consumers in a number of ways:
- Renegotiate the debt on behalf of the consumer, lowering the total cost owed
- Negotiate a lower interest rate
- Pay the debt on behalf of the consumer
Consumers who sign up for these services grant permission for the service to contact creditors on their behalf in order for negotiations to take place with the creditors. When the new payment terms are agreed upon, consumers pay the debt management service instead of paying creditors directly. The service then distributes the payments to the creditors on behalf of the consumer.
Why do creditors agree to lower balances and/or interest rates? Not all creditors do agree to participate in these negotiations, but the creditors who do participate do so because they understand that the alternative might be the consumer filing bankruptcy. Simply put, agreeing to the terms of a debt management service will probably result in more payments than if a consumer files for bankruptcy.
Debt Management versus Negotiation
Although the debt management service does negotiate the amount of the debt owed along with the interest rate applied to the debt, there is a difference between debt management and debt negotiation. Consumers who hire a debt negotiation service usually do so because they have the ability to offer a lump sum for the total debt while consumers who enroll into a debt management service generally do not have the financial means to try to negotiate the payoff of the debt for less than what is owed.
Plenty of options are available for consumers looking to enroll in a credit card debt management service. Before enrolling, do a little research on the company you want to use. Make sure there are no pending complaints for the company through the Better Business Bureau. It is also a good idea to do a general Internet search on the company to read about any consumer complaints that may be written about the company. If you encounter a large volume of complaints about the company, it may be a good idea to use a different company.
A non-profit debt management service may have lower fees than a for-profit debt management service, but do not make this assumption until you have had a look at the fees for yourself. Remember: While these companies offer a helping service, they must still charge a fee either to you or to your creditors in order to keep their doors open.
Here is a brief list of some of the debt management services with online offerings:
- American Consumer Credit Counseling
- Care One Debt Relief Services
- In Charge Debt Solutions
- Consolidated Credit Counseling Services
A debt management service should offer you financial management tools in the form of budgeting classes, one-on-one money management consultations and other educational tools that will assist you in getting your finances back in order.
When you enroll in a debt management service you can expect to sign a contract which will state you will not apply for additional credit cards while enrolled in the program. It is important to note that enrollment in a debt management service is usually notated on your credit report, so even if you try to apply for additional credit it will almost always be turned down. If the debt management service discovers your attempt to obtain additional credit, they may disenroll you from the program.