What is Debt Management Services?
Debt Management Services providers stand as intermediaries between creditors and the debtors. Their main function is to arrange for the debtor a new single monthly payment for all the debts and distribute this single payment to the various creditors. These go-betweens help you manage in settling your debts by negotiating lower interest rates, requesting for a stoppage of the accumulation of interest or reducing your account balance on your behalf. In exchange for helping you manage your financial obligations, the companies providing such services get a commission which is commonly at 10 percent of your monthly payment. Some also charge additional commission after successfully getting creditors to agree to give the debtor a rebate.
Unsecured debts are the main and primary scope of these services, for instance, the credit card. It is not applicable to any secured debts; to be more precise, the mortgage loan. There are really lots of types of services but make sure apply only which is applicable in your case.
The Scope of Debt Management Services
The breadth of debt management services is wide. Debt management is not to be confused with debt consolidation where all of the debtor’s obligations are settled using the newly-obtained consolidation loan. The service in debt consolidation ends after this new loan has been released. It also should not to be confused with credit counseling. Although these various debt management services can be thrown together under a debt management program.
The type of loans covered in debt management services are unsecured loans such as those incurred from credit cards, school loans and personal loans. The service may not be helpful for secured loans, such as property mortgage or car loans.
The Benefits Of Debt Management Services
You can focus on making one low monthly payment. One good feature of this is that it has a low monthly payment. The debt management provider can negotiate a new payment schedule for the debtor to follow with the possibility of reducing the monthly payment under this new payment plan. Combining all debts into one also gets rid of the confusion that overwhelmed debtors with multiple debts may be experiencing.
Credit collector stops bugging you. Availing of debt management services can put a stop to the harassing calls from credit collectors, bugging debtors to settle their debt.
Reduced interest rates. Debt management services provider can also negotiate to reduce interest rates or even stop the accrual of interest. To do this, the debtor should present his or her capacity to pay as evidenced by his current source of income.
Reduce your debt drastically. This service can lower your debt drastically by getting rid of accumulation of interest. The debtor can even go for negotiation to also lower the principal value or even stop the accumulation of interest.
Get a custom-made financial plan that will suit your needs. The service will be tailored to your needs and capacity to pay. The debt management services provider will analyze your financial situation by reviewing your monthly income and some other assets as well as your expenses. Based on their findings, they will produced a plan tailored to your financial capacity.
Availing of debt management services may be helpful to debtors overwhelmed by their financial obligations by negotiating on their behalf lower payment schemes, arranging for them a payment schedule to pay for one monthly payment and distributing the payments to the various creditors.