Concerned about debt? Struggling to make ends meet? Need help finding the right debt solution?
A debt management company—sometimes referred to as a credit counseling company—works with you to set up an affordable budgeting structure that will help you pay down your debt in an efficient way by creating a debt management plan.
Could a debt management company be the right choice for you? Ask yourself:
- Can I afford my current monthly minimum payments?
- Could I afford to pay a bit more than my current monthly minimum payments?
- Am I current on at least one of my credit card payments?
If you answered “yes” to all of these questions, then you might be a good candidate for a debt management plan. So how do you get started finding a debt management company who can help you get started? Read on…
7 Tips On Finding a Debt Management Company
As your finances are serious business, it’s important to find the trusted resource to help with your situation. Here are seven things to evaluate when researching a debt management company.
- Industry Memberships: For debt management and credit counseling companies, look for NFCC or AICCCA membership. This affiliation implies an adherence to industry standards and best practices—such as hiring certified credit counselors, submitting to routine audits, and more. If a company isn’t a member of at least one of these, consider it a red flag.
- Better Business Bureau (BBB): Look for a company that has this accreditation and a positive BBB score as well as positive reviews. If a debt management or credit counseling company isn’t accredited by the BBB, ask them why.
- Years in Business: Like most companies in the financial industry, the longer they have been in business, the more likely they are successful at what they do. Plus, it may take a couple years to fully pay off your debt, so you want a company that will be there through the whole process.
- Fees: Debt management companies may charge a setup fee as well as monthly fees. State laws typically set a maximum that can be charged, and it ranges from $50–$100 depending on the state. Before you enroll in a plan, ask for a schedule of fees in writing so you can get a full picture of how much you will be paying each month.
- Financial Education Tools: The goal of enrolling in a debt management isn’t just to put this debt behind you—it’s also to ensure that you don’t end up in this situation again. Everyone learns in a different way, so make sure that whatever educational materials the debt management company offers, such as budgeting worksheets, articles, and in-depth brochures, are things you understand and are useful to you.
- Customized for You: No two people have the same type of debt, so find a debt management company that can customize a debt management plan specific to you. That way, you will increase the chances that you will succeed in the plan.
- Trustworthiness: Find a company that will listen to you as well as share the hard truth. Reputable companies do not make empty promises. They stand by your side, providing tools and support for you to succeed. The right company will listen to your concerns, plus answers questions in an honest, complete manner. You should never feel pressure to enroll—if you are getting that feeling, then step away and continue your search.
How a Debt Management Plan Works
Once you’ve selected a credit counseling debt management company, you will have an appointment with a certified credit counselor. First, they will look at your situation to better understand all of your monthly expenses, not just debts. Then you will enroll in a debt management plan that they have custom-designed for you.
A debt management plan will not reduce the amount of your debts. You will pay back 100 percent of your debts plus interest. However, a debt management credit counselor will negotiate with your creditors to get you a lower interest rate—called a “concession rate”—on your debts. Your monthly fees to the debt management company will be based on this new concession rate.
While enrolling in a debt management plan could save you money in reduced interest and help consolidate your monthly debts into one payment, working with a debt management company could also lower your credit score as well impact your ability to open or use additional lines of credit, as some lenders may consider you a risk. Additionally, some or all of your credit card accounts may be closed.
Do More Research, Talk with a Certified Credit Counselor
Whether or not you move forward with exploring debt management plans, you’re doing the right thing by seeking out a solution for your debt. To learn about other debt solutions beyond debt management plans, download the free Freedom Debt Relief How to Manage Debt Guide. It explains how to determine if you need to worry about your debt, the five most popular ways to manage debt, and offers easy tips on how to choose the debt solution for you.
Plus, we here at Freedom Debt Relief are always ready to help answer your questions about debt management plans as well as other debt solutions. Call one of our Certified Debt Consultants at 800-230-1553 today or request a free debt evaluation online. And of course, our website has lots of information to help you learn more and understand which might be the best way for you to become debt-free.