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Debt Management Companies


Many companies find themselves downsizing in this economy, but debt management companies seem to be very much on the rise.

One reason is that more people are in debt for a greater amount of money than at any time in our country’s history. Some of it is good debt, as in home ownership. But a frightening large amount of it is in credit card debt. The loss of millions of jobs over the past decade is not helping either. As consumers find themselves getting further and further behind on their credit card bills, they see  the late fees, penalties, and so on adding up – and making it even harder to pay off their credit cards.

If you are having troubles paying off your debt, debt management companies offer to help you pay them off, for a fee. The idea is that you will make only one payment a month – to the debt management company. This will make it easier on you. They, in turn, will distribute the monies to all your creditors, taking a fee for themselves of course. Their services may also involve negotiating with creditors to lower you interest rate or modify your payment schedule so that your bills can be paid more easily. In theory, this situation should result in a win-win for everybody.

The downside to this, however, is that joining a debt management company  may affect your ability to get new credit. The reason is that a notation to the effect that you are paying certain bills via debt management companies will be posted to your credit report.

To many lenders, this is a red flag. And, when you sign a contract with a debt management company, the term is usually for at least three years and sometimes more. All this time, that notation will appear on your credit report. Typically, your credit score is not affected. But if you are planning on making a large purchase in the next few years of so where you will need to apply for a new loan, you probably should reconsider dealing with debt management companies for the time being.

One alternative to debt management companies is to seek the help of a debt management consultant. A consultant’s job is to show you how to manage your debt yourself. He will help you to create a balance sheet of your assets and liabilities. He will also help you to set up a workable budget that will allow you to pay off your debts. You can hire debt management consultant on a one time basis to help you with the initial setup, or you may hire him for a certain number of months until you are sure you can go it on your own.


Debt Relief Options
Sometimes when your credit card balances begin to overwhelm you, you need to choose from one of the many debt relief options.

Debt Elimination Services
Many people in debt looking for an effective way of getting rid of their debt, seek out debt elimination services.



 

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