Debt Management – What Are the Different Types of Debt Management?
Debt Management involves hiring a professional to negotiate with your creditors to settle your debt. The debt counselor contacts each of your creditors and tries to get concessions, such as lowered interest rates and lower monthly payments. The debt counselor also may be able to “re-age” your account to avoid late fees. Debt counseling services usually cost an initial fee, as well as a monthly fee, which varies from agency to agency. Some services may waive the fee if you’re in financial distress or have severe financial hardship.
Debt management services can also include budgeting and setting priorities. These tools can help you stay on top of your debt and make it easier to make payments. There are also ways to negotiate with your creditors, such as lowering the interest rate on your accounts or closing some of them altogether. Another popular option for debt management is credit counseling. You can find a credit counselor in your area through the National Foundation of Credit Counselors. Before choosing a credit counselor, read reviews about the service and understand the fees associated with it.
Debt management services can also include the use of derivatives. Whether you choose to use derivatives or not depends on your company’s unique situation and policies. However, if you decide to use derivatives, you should make sure to document the risks and benefits of using them. The GFOA’s advisory on derivatives can help you develop the appropriate policy.
While debt management services can impact your credit score, they are generally not detrimental to your score. Your credit score is heavily influenced by your payment history. If you have a history of missed payments, debt management can help you repair your credit score. Conversely, if you have high credit utilization, a debt management plan may have a negative effect on your credit score.
Debt management services allow you to simplify your payment process. With this method, you only have to make one payment each month to the debt management facilitator. You’ll also have a fixed monthly payment. Over the course of a few years, you can pay off your account completely, resulting in massive savings.
Debt management plans are designed to help consumers reduce unsecured debts. These include credit cards, medical bills, utility bills, and most personal loans. Secured debts, such as federal student loans, are typically excluded. Debt management plans are also designed for people with steady incomes and a low credit card balance.
Debt settlement is another option for reducing debt. Debt settlement companies promise to negotiate with creditors and get them to accept less than what they owe. However, the process is time-consuming and expensive. Some settlement companies charge as much as 15-25% of your total debt. This can cost you thousands of dollars.
Debt Management – What Are the Different Types of Debt Management? was first seen on Help with My Debt