When your personal debt begins to spiral out of control, you may start to consider using a debt management service. There are many stories and rumors about debt management services, but the best way to get the most out of a debt management service is to ignore the stories and find the truth.
When to Use Debt Management
If your debt has reached the point where it is difficult to pay each month, then you should consider debt management. It may be that your spending habits have something to do with why your debt continues to grow. An effective debt management service will not only help you find ways to get your debt under control, they will also work with you to get your spending under control. A debt management service will negotiate with creditors on your behalf to help lower interest rates, reduce the amount you owe in penalties and help to get you a monthly payment you can afford. But if your spending habits cause your debt to spiral out of control again, then the efforts of the debt management service were for nothing. A good debt management company will go to the source of your problems, your spending habits, and help to get those and your debt under control.
When Not to Use Debt Management
If you can still afford your monthly payments without putting too much strain on your budget, then you still have a chance to get your own debt under control. A debt management service will charge you a monthly fee to help you manage your debt, and you can avoid that fee if you just learn to exercise control in your spending and start to pay off your existing debt.
If your debt is so out of control that it would require a major debt consolidation to get your payments to a point where you can handle them, then debt management is not going to help you. When you have reached that point where your debts are far beyond your monthly income, then you would need to seek the assistance of a debt consolidation company or a financial attorney.
Debt Management vs. Debt Consolidation
Debt management is the process of helping people to manage their current debt without using other means of finance to do so. Debt management companies negotiate with your creditors and try to work out an arrangement that will lower your monthly payments and make paying off your debt easier for you. Debt management firms help you use your current resources to get your debt under control. There are no loans involved in debt management.
Debt consolidation is when your various debts are combined into one debt, leaving you with just one monthly payment to make. Your multiple payments are consolidated into one payment plan, and there is a note made on your credit account that you were involved in a debt consolidation program.
Debt consolidation can require financial knowledge that you may not have. You will need to understand how to negotiate a loan with the debt consolidation company, and then you will need to be able to understand how the consolidation program benefits you over having the multiple accounts. With debt management the emphasis is on one account at a time. You are given the ability to pay back your debt to the same people you got the debt from, and you are able to do it at a rate you can afford. For many people debt management is preferred because they are easier to understand because they deal with restructuring existing debt, and making payments on accounts that people are already familiar with.
Are Debt Management Plans a Good Idea?
If you cannot make your monthly payments easily and you do not want to risk trying to negotiate a consolidation loan, then a debt management plan is the right solution for you. Once you are under a debt management program, it is important to stay with it and make your payments each month to ensure that your credit is getting affected in a positive way.