debt counselor

How To Utilize Debt Management To Stop Collection Calls

June 13, 2013 by editor

Collection calls can be a real stress inducer in a consumer’s life. It is bad enough that you know you failed at money management. The very thought of your inability to pay off what you owe is enough to keep you awake at night. Imagine how worse it would all be to have someone call you every day just to remind you that you have been late on debt payments. These calls are rarely friendly and they are oftentimes abusive, threatening and harassing. You would give anything to have these calls stop so you can think and get yourself out of debt in peace.

While you want to hate these callers, you need to realize a couple of things. One, they are only doing their job. Two, your debt is profit for them and they have every right to collect from you. Three, they are not out to attack you personally. And last, your debts are your responsibility and you are the one who is at fault by putting yourself in a position wherein you cannot afford your debt payments.

Fortunately for you, there is a way to stop the collection calls from happening and that is debt management.

This type of debt relief program involves a debt professional who will help you with your financial difficulties. You will both come up with a debt management plan or DMP that will serve as the new structure of your payments. The counselor will not only take an active role in paying off your dues, they will also teach you how you can keep yourself from landing in another debt pit. With your DMP, the counselor will get in touch with your creditor to ask for approval. This plan contains a lower monthly payment that is stretched over a much longer time frame. If possible they will even negotiate for the creditors to lower your interest rate.

That sounds like a good way to pay off debt right? But that does not answer the question as to how it can help stop collection calls.

The thing about debt management companies is that they are funded and backed by credit companies. That will give you the assurance that these people will be entertained by your creditors. Although that arrangement may seem like suspicious because you might end up being coerced to submit to the plan of your creditor – it does not work that way. At least, there are legitimate companies who sincerely want to help out consumers pay off their debts without getting to the bad side of their respective creditors.

This relationship is the reason why collection calls will stop. When you are enrolled in a debt management program, your application will be reported to your creditors. The debt management company will tell your creditors that they do not need to remind you of your debt. That is because you already took the steps to make sure that you can keep up with payments by enlisting their help. More than anything, your creditors just want the assurance that you will pay off what you owe. Since you are being represented by a debt management company that they recognize, they can ease their worries and as a result, ease up on the collection calls too.

Will Debt Counseling Get You Out Of Debt?

April 4, 2013 by editor

Debt counseling, while it is effective in educating you about your debt is still quite limited in terms of what it can really do for your financial troubles. You need to understand just what this debt relief option can accomplish and what you need to add to it so you can get out of your credit obligations.

First of all, this is concentrated on counseling. That means, you get a debt counselor to look at your finances and see where the problem is. You will rely on their expertise to help you understand what you did wrong and how you can arrange your finances to be able to afford your debt payments. Clearly, that is your priority. The debt counselor can also help you learn how to budget and point out financial management skills that will help you achieve and maintain a debt free life.

As helpful as all of these sound, that is as far as the assistance will go. Of course, you have the option to extend the service further but this will already entail costs. Debt counseling is free but if you want more assistance, you can enrol in a debt management program. For a fee of no more than $50 a month, the debt counselor will help you create a debt management plan that will allow you to make smaller payments every month. This lower amount happens because your debt amount will be paid off over a longer period. The counselor will negotiate on your behalf so your creditor will agree to it. In most cases, they will even ask the creditor to lower your interest rate and if accepted, that can lower your payments even further.

But if you are wondering if that is enough to get you out of debt, the answer to that is yes, but it will depend on your own commitment. In fact, any debt relief program only takes care of a part of the problem. Most of it will be reliant on your commitment and ability to get out of debt.

First of all, you need to have a steady income to afford your debt payments. There is no debt reduction in debt counseling. Although the monthly payment will be smaller, you still end up paying for the total amount of your debts.

You should also stop acquiring debts if you really want to get out of debt through this debt relief program. If you are still incurring debt because you or a loved one is still undergoing medical treatment, then rethink your debt relief option. This may not work well for you.

As you go through this debt relief program, you also have to develop and practice the right personal finance management skills. The debt counselor can teach you what they are but the implementation will be all up to you.

These practices include budgeting and saving. Budgeting involves creating a plan that will show you the income that comes in every month and every expense that it funds. It allows you to monitor if your money is going to your priority expenses.

The other important practice that you have to develop is saving. This will help secure your future and also, keep you from defaulting on your payments. Even if something happens, you can be assured that your debts will be funded.

All of these combined will definitely help make debt counseling an effective option to get out of debt. More important than paying off the debt that you owe is making sure that you will never be in another debt situation in the future.

Indications That Debt Consolidation Loans Should Not Be An Option

March 26, 2013 by editor

Getting a debt consolidation loan is an effective solution for your credit problem but you have to know the signs if it is not the right option for you. There are many debt relief options and the closest to a debt consolidation loan is debt management. If you want to enjoy the benefits of the loan but you lack certain qualifications, then you should opt for the latter.

So what are the signs that you should not choose debt consolidation?

First of all, you need a steady income to opt for this. A lender will not mind your application for a loan if you do not have this. It should not just be a steady income, but it should be able to cover your monthly payments. If this is something that you do not have, you will not have much luck with debt management too. Your best option will be debt settlement or another debt relief program that will help reduce your balance.

Another indication that debt consolidation loans will not help you is when you have low credit score. It is one of the factors that will affect the interest rate that will be placed on your loan. So if you have a bad score because you have defaulted on your payments already, check if you have a collateral to use on a secured loan. Either one of these will make you a low risk borrower and will prompt the lender to give you a low interest rate. If you have neither, then you should consider debt management.

If you are still incurring more debts, then you may want to forego debt consolidation loans. This is only for those who can stop acquiring more credit. Debt consolidation loans could make you believe that you no longer owe any debt because of the zero balances on some of your cards. Going into debt consolidation requires self restraint and hard work. There are instances when you will still incur debts such as when you are dealing with medical bills. Even if you opt to consolidate your loans, you will still incur debts after the fact. If this is the case, it is better to look into other forms of debt solutions.

One of the other things you should look out for when weighing the option of debt consolidation is when your income is less than your total payables. A high debt to income ratio is not something that can benefit this program. Debt settlement or bankruptcy may be the better option.

Lastly, if you know that you need an expert guiding you, then debt management may be your best chance to completely pay off what you owe. There is not debt counselor involved in debt consolidation loans. Making sure that your monthly payment is met will all be up to you. Controlling your spending to avoid incurring debts is something that only you can do.

There are other debt management options available for you if you seem to not qualify for debt consolidation loans. There are numerous other ways to pay off your monetary obligations and achieve financial freedom. But regardless of what you choose, you need to identify the reason why you got into debt in the first place.

How To Choose Between Debt Management And Debt Consolidation Loans

March 7, 2013 by editor

When you have decided to get rid of your debts, the next decision that you will make is how you will accomplish that. To make that choice, it helps to know the different qualifications that will allow you to successfully solve your credit problems. Some of the options have significant differences in terms of requirements while the others have minimal distinctions.

Two debt relief options that are more similar than the rest is debt consolidation loans and debt management. To help you choose between the two, let us discuss their similarities and differences. There are two factors to consider: process and requirements.

Beginning with the process, they both will lead to a single payment scheme. In debt consolidation loans, you will apply for a loan that is big enough to pay off your other credits. Once they are all paid off, you can only concentrate on the big loan. The effort exerted to monitoring different accounts can now be put into your efforts to grow your debt payment fund.

In debt management, you hire a third party company who will assign a counselor to help you come up with a payment plan. The debt counselor will negotiate with the creditor to allow you to lower your monthly dues by increasing the length of your payment period. For a minimal service fee, you will send the total amount of your monthly debt payments to the counselor who in turn, will distribute it to the creditors that you enrolled in the program. Since they are taking care of the details, you can also concentrate on growing your income so you have more to use on your debts.

Both of them will aim to give you a lower interest rate. However, this is more controlled with debt consolidation loans. Naturally, you will choose the loan that will give you a low interest rate. In debt management, you leave it in the hands of the creditor. The counselor will help you negotiate but there are no guarantees.

In terms of the requirements, you need to have a steady income for both of them. They will not reduce your debt balance like debt settlement. You will just be shifting your debts around so you can benefit from the single payment plan. The difference between the two is the additional cost required in debt management. You need to pay for the service fee of the counselor – who is helping you distribute payments and communicate with your creditors.

In debt consolidation loans, you need either a good credit score or a collateral so you can enjoy a low interest rate on the loan that you are applying for. These two requirements are not necessary to get a loan approval but they both will make you a low risk borrower. By being such, you can be given a low interest rate on your loan. If you are a high risk borrower, the lender has to protect their investment because the chances of you defaulting on your payments is more likely. A high interest rate will give them this security.

These are the main similarities and differences of debt management and debt consolidation loans. Choose based on what program you think you can finish. It is important to select the one that will help you learn your lesson. More than anything, you need to learn how to stay out of debt – even as you are paying off the current one. Regardless of your choice of debt relief, this is vital for you to truly achieve financial freedom.