Debt Management

If your bills are piling up and you can’t pay them, you are not alone. In 2003 the National Foundation for Credit Counseling (NFCC) and its 1,450 centers was involved in providing debt management help for 1.6 million American families. All of these households had one thing in common: failure to manage their debts adequately. Of the million or so who were counseled a third made the choice to join a debt-repayment plan. They got debt management help and so can you.

It is estimated that most people who get themselves into debt they can’t afford to repay hold an average of six credit cards and are $18,000 in debt. Many of these people got themselves into debt for the first time during their student years and don’t understand the charges that come along with buying on credit. Sometimes people get into hot water after a job loss, divorce or illness.

If you are one of the many people who need a little help, let’s face it anybody can get themselves into a sticky situation. Its how you get OUT of it that makes the difference. The good news is that there are plenty of non-profit organizations out there that are more than capable of providing you with expert debt management help.

Debts that run into the thousands aren’t that easy to get rid of but there are reputable companies that can assist you in negotiating a schedule to repay your debts. They will also help you to gauge the areas where you tend to overspend. In this case slow and steady really does win the race.

You need to be careful though, since there are just as many unscrupulous companies out there and they will most likely get you into even more debt or even bankruptcy!

Do You Need a Debt Management Help?

Outside help is available but before approaching the experts you need to be absolutely certain you have explored other avenues of help. For example:

* A loan from a family member

* A loan from your 401 (k) – Limits can be as high as $50 000.

* Consolidating your debt on a low-interest rate credit card or tax-deductible home equity loan.

* Reducing your expenses – probably the fastest way to reduce your debt.

Finding a Reputable Debt Counselor

Assuming you have examined and discarded the above options you now need to choose a good debt counselor. Most people don’t feel comfortable revealing to friends or work colleagues that they are in the middle of a financial crisis and choose to find one on their own. As you begin your search keeping the following points in mind may help to smooth the way:

Try to find a reputable non-profit firm. You are already in debt so don’t aggravate it by running up additional expenses. Most debt management help is offered for a nominal fell or a donation. Non-profit organizations are usually held in high esteem by creditors and are able to negotiate better repayment deals.

Make sure the debt counselor has a strict privacy policy and won’t sell your information.

Make sure you know what services you will be getting – for example counseling, debt repayment plans and advice on budgeting. Try to get as many as possible under one umbrella and get it in writing.

Find out if the company is a member of a professional group like the NFCC (National Foundation for Credit Counseling) or Better Business Bureau. Ask them to provide information about audits and whether their funds are protected – you are handing over your money! Don’t be scammed by the few bad eggs out there offering fraudulent debt management help.

Debt Management Plans

One-Pay Plans

Once you have settled on a service you feel confident with, get all your bills together and approach your counselor. He or she will calculate what is owed and consult with you to establish how much you can afford to repay each month.

Each month you will write one check to the service instead of several to your creditors. The debt management service will then distribute the money to the people you owe. At this point your creditors should stop hounding you for money. They are usually far happier once a debt management service is handling the situation.

The general idea is to pay off your debts and still afford to live reasonably well. You should be able to pay of all your debt in four to six years. This is successful debt management help.

Negotiating Peace of Mind

Your counselor is experienced in talking with creditors and will try to organize that your interest rates and late fees are reduced in an effort to reduce your time in debt. If possible they will try to get your accounts re-aged so that overdue amounts are reflected as current.

Creditors are often happy to negotiate rather than pay a debt collection agency to recover the debt. Very often such agencies take up to 50 percent of the debt in fees so it is more cost effective to work with a debt repayment plan.

The good thing about a debt repayment company is that is has pre-existing relationships with many creditors so their chances of successfully negotiating a deal are much greater than yours would be. So professional debt management help can enhance your chances,

Debt-Consolidation Loans

This is a good idea if the rates are on the low end of the scale. An interest rate of 8 or 9 percent is far better than the 16 percent you will accrue on a credit card. Do some research to see if this type of debt management help might be a better option for you.

Learning How to Budget

So you are now set up to repay all the money you owe – but it won’t work for very long if you still have the same bad habits that got you into hot water in the first place. You need to learn how to budget if you are going to move forward financially and your credit counselor can help you do it.

He or she will teach you how to keep track of both small and big purchases so you will know exactly how much you are spending each month. Most people who do this exercise are surprised at how much they really spend each month.

In Grandma’s day people were far more conservative with their money but today’s credit driven consumer society has changed all that. It is all too easy to whip out the plastic and buy what you can’t really afford. Your counselor will teach you how to track your spending and quit while you are ahead. They will keep an eye on you afterwards too, to see how much success you are having with your new financial management skills.

The Cons of Credit Counseling

Some creditors look down on those who choose credit counseling and debt repayment plans as an option. In this case they might issue an alert on your credit report. This will make it hard to get any type of credit in the future. However if you don’t pay your bills an alert will be issued anyway, so it’s your choice if you want to make use of this type of debt management help.

In the end you will need to pay for everything you buy so make sure you can afford your desires before buying them. Debt management help can go a long way towards regaining some peace of mind but try to avoid needing one if you can. Retailers do make buying their products very attractive but they aren’t paying your bills so be cautious with your spending habits, try to save and you will be in a far more financially stable position. Do make use of debt management help if you need it but don’t make a habit of relying on it.