Debt Management Services

Taking advantage of reputable debt management services can make all the difference for anyone whose personal finances have gotten out of control. When indebtedness has careened out of control, many consumers take advantage of the help that is offered by professional credit counselors. These counselors will often point clients in the direction of qualified debt management services. Managing the debts of clients will generally involve speaking with creditors on behalf of the debtor. By negotiating with the various lenders, these services are often able to create a manageable solution for the client that may consolidate loans and reduce interest rates. In exchange for this service, most providers will charge a fee. That fee is often a percentage of the agreed upon monthly payment that has been negotiated on a client's behalf. The monthly payment is usually paid to the service itself, and then redistributed to the creditors. Unsecured loans such as signature loans and credit cards are most often types of indebtedness that can benefit the most from this approach. Secured debt, such as home mortgages or even vehicle financing will not generally be helped by working with these service providers.

Approaching professional debt management services may have a negative effect on a consumer's credit rating. When there is a record of prior fiscal struggles, some creditors may be less likely to extend credit in the future. Not all lenders view the situation in the same way, but a consumer's overall credit score may drop just the same. But if the only other option is to continue to make late payments or to default on existing loans, hiring debt management services can be the wiser alternative. Some of these service providers will charge large commissions, asking for ten percent of a consumer's monthly payment or higher. In addition to the commission that is charged to the client's account, some creditors could also end up paying a rebate to the service. Care should be taken to understand all fees and commissions up front. While there are many reputable financial service providers, there are also a number of unethical ones who will take advantage of an individual's seemingly desperate situation. It is also wise to ask what will happen if a payment to the service is missed. Will there be steep penalties and late fees? Some services advertise that they are non profit organizations, but this may not necessarily be the case. A declaration of non profit status will not always mean that the fees charged will be any lower.

Of course, there are many reasonable alternatives to professional debt management services or consolidation loans. Many consumers prefer to negotiate with creditors themselves. Rather than face a default, some creditors are willing to work with debtors and waive fees or lower interest rates. An individual need not always hire a professional service to do this for them. If consolidating loans seems to be the only viable answer, many consumers are able to work this out themselves rather than consult professional agencies. Traditional lenders can sometimes help a borrower work out a consolidation plan without the use of a middleman. If a consumer's credit score is still high enough, an unsecured loan may be a possibility. Secured loans such as home equity loans or refinancing can also provide a possible alternative. In some extreme cases, bankruptcy may be the only option. If the situation is so desperate that professional debt management services will only put off eventual disaster, then bankruptcy may be the last resort, but the only realistic one. In the face of extreme financial difficulty, many consumers feel that there is no hope. The Bible talks about the hope that can be found in God. "Before the mountains were brought forth, or ever thou hadst formed the earth and the world, even from everlasting to everlasting, thou art God." (Psalm 90:2)

Many consumers are unaware of the kinds of legal rights that are available to them whenever they sign on with professional debt management services. Clients should understand that until they have signed an agreement with the financial agency, no fees can be assessed. There are also specific limits on the size of the fees and commissions that a service can charge. These fees will vary depending on the kinds of results a counselor has been able to negotiate on behalf of their client. Should it be discovered that an agency has charged unlawful fees; the original agreement can be voided. These services must also provide the client with a monthly statement reflecting all activity on their account. Exorbitant fees that are charged to a client are always a cause for concern. Often, the creditors themselves are helping to pay the fees associated with debt consolidation. If an organization is charging large monthly fees to a client, they may be engaging in a greedy form of double dipping. While loan consolidation can provide a healthy alternative to bankruptcy, unscrupulous providers should be avoided. Such organizations seek to prey upon the fear, shame, and desperation that many clients feel when under extreme financial pressure.

There are legitimate debt management services that operate on a non profit basis. Many of these organizations are government funded. Some could receive support from private donations. These organizations will generally charge a small fee for their efforts. Like their for profit counterparts, these agencies will negotiate with creditors on behalf of the client or work out a loan consolidation plan.

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