The phone rings and you cringe. Debt collectors are relentless, but it is not personal. You are merely an account number with a balance owing. If debt collectors are calling, chances are you are in financial trouble or on the fast track to financial trouble. You are not alone. With the current economic crisis, more people than ever are behind on their consumer debt. In fact, many celebrities have blown through millions of dollars and are now in great debt. Wishing your debt away won’t work.
Signs You May Be in Need of a Debt Management Program
Even if the debt collectors aren’t calling you night and day, you may already feel like you are in a debt crisis.
- Are you using one credit card to make payments on another credit card
- Do you use credit cards to pay your utility bill and buy groceries, but can’t pay it off at month end?
- Are your cards maxed out?
- You are able to make only the minimum payment.
- Do you use credit cards for necessities because you don’t have money?
- Do you only make the minimum payment?
- Is your debt increasing but your spending isn’t?
Know Your Options
Debt management programs vary, and rules regarding debt relief agencies vary from state to state. Knowing your options is important. It isn’t easy to admit you are over your head, but getting help is important if you are ever going to get out of debt.
A good debt management program can put you back in control of your finances. You may be able to work with your creditors yourself in some cases. However, you need to be savy regarding your rights and the law concerning debt and debt collection. More importantly, you need a clear understanding of why you are in need of debt relief now. Why and how the debt occurred is the biggest factor. A reputable debt management program will help you evaluate your financial situation, create a budget, and work with creditors on your behalf. They may be able to advocate for you with creditors and reduce finance charges, late fees and/or over-limit charges, and monthly payments. Often the stress relief you receive from allowing a debt management company to step in invaluable.
What Are Your Goals?
A debt management program will help you simplify your monthly unsecured debt. Unsecured debt is debt that is not “secured” to an asset. Examples of unsecured debt include: credit cards, department store cards, credit lines, and some personal loans. An example of a secured debt is a home mortgage or car payment. A debt management program can help by consolidating all or most of your unsecured debt into one payment, and distributing to your creditors on your behalf.
With a debt management program, you may be able to get out of debt faster than trying to get out of debt on your own by simply paying more than the minimum payment. The debt management company will deal with the credit companies on your behalf, stopping stressful phone calls and collection letters. For many people, just having a plan will ease stress and worry. Knowing you are not alone also helps. A debt management program may be able to give you the peace of mind in knowing you are not alone and you have help.
You may be surprised at how quickly you are able to pay off your debt. While this will depend largely on how much unsecured debt you have incurred, most debt management plans target 60 months or less. Today, credit card statements, by law, must state how many years it will take you to pay off that credit debt by paying only the minimum payment. That information alone is enough to sober most consumers. If you aren’t able to make even the minimum payment, a debt management program may be your best option.
Know Whom You Are Hiring
Research programs yourself, get referrals, even ask the better business bureau, but make sure you know something about the debt managment program before you use their services. Know the differences in non-profit and for profit debt management programs. You might be surprised. How does the debt management company earn their money? Some non-profit debt management companies are actually funded by credit companies. This isn’t necessarily bad, but it is important to know with whom you are dealing. Don’t be afraid to ask for information. A reputable debt management company will be open and honest in all communication.
A debt management program should offer counseling that educates consumers on debt, credit and other financial matters. Education is important, if not critical, after seeking help managing your debt. Perhaps you were laid off or for some other reason are in great debt through no fault of your own. It is still important to become or remain educated on consumer debt and other financial matters. Search for another debt management company if the one you are considering doesn’t offer consumer education. One of the best places to look for objective information regarding consumer debt is the federal trade commission’s web site.
Read the Fine Print
Also look out for excessive costs. Be careful not to get involved with a company that charges a large upfront payment just to create an account. Check your options and the better business bureau if you have any questions about payments you are asked to make.
A written plan is important. Debt management programs should provide a written plan for your debt reduction or debt elimination. With a written, personalized plan, you will know how creditors will be paid, and have no-nonsense goals for helping you realize financial freedom and stability.
