There comes a time in each person’s life when help of some sort or another is needed. Dealing with outsized debt can be one such circumstance. Yes, there are many things you can do to resolve such a situation on your own, however, resolution can often be accomplished faster and easier with professional help.
That is why the debt relief industry exists. To get the best out of an association with one of these organizations, it’s useful to know what to expect from the best debt relief companies. The first thing you need to understand is that debt relief comes in a number of different forms, each one tailored to your situation. Among these are credit counseling, debt management, and debt settlement.
Here’s an overview of what to expect from each one.
1. Credit Counseling
Typically offered by non-profit entities such as universities, credit unions, the military, and housing authorities, credit counseling matches you with an experienced individual who will help you find a way within your current situation to get your debt under control. Such agencies offer advice on budgeting and managing household expenses, along with free workshops, brochures, and other related materials.
A credit counselor — with your cooperation — will review your entire financial situation to help you develop a plan fitted to your needs. You can anticipate spending at least an hour with a counselor at your initial session. The term “non-profit” doesn’t mean free, however, nor does it always mean affordable. Moreover, you’ll have to research to find good, affordable, honest help.
2. Debt Management
Credit counselors will recommend debt management if they determine that simply rearranging a few things in your budget will be ineffective. Under In other words, rather than paying your creditors directly, you’ll forward payments to your counselor, who will then disburse funds to people you owe. You’ll be required to close your credit accounts to prevent new charges while you’re in the program. This could have a detrimental effect on your credit score initially, but that will turn around if you stay with the program. And yes, you’ll pay a fee for these services.
3. Debt Negotiation/Settlement
In situations too dire for debt management to be effective, the This is accomplished by offering a one-time payment in full of an agreed-upon amount to settle the debt altogether. Significant savings can result, as can repaying debt in full in less time.
However, there will be a detrimental effect on your credit score. To accumulate the funds required to settle the debt, you’ll funnel the cash into an escrow account from which the negotiated payment will be made.
As a consequence, each creditor will report your missed payments to the credit reporting bureaus, which in turn will diminish your credit score. However, before you get too concerned about that, it’s important to remember that your credit rating will have, by then, already taken a significant hit. And, like debt management, once you emerge from the program, you can begin to rebuild your history with a clean slate. Fees vary, but often are applied in accordance with the amount of debt negotiated. You’ll also need to be careful to choose wisely, as nefarious individuals tend to lurk around the edges of this industry.
Knowing what to expect from the best debt relief companies can help you decide which approach will be best for you. The good news is they all work, it’s just a question of determining how deep and steep the circumstances surrounding your indebtedness really are.