Sometimes people find it difficult or intimidating to call up their creditor to start negotiating with them about interest rates and pay out terms. There are companies and organizations out there that help people who are trying to find their way out of debt.
If talking to and negotiating with your creditors is too difficult or intimidating, consulting with a Debt Management company or Consumer Credit Counseling Service may be helpful. Many of these companies are non-profit organizations that are genuinely interested in you getting your debts paid off and behind you so that you can move on. If there are fees for their services, they tend to be very reasonable, and there is a lot of value to the services they provide.
Debt Management services should not be confused with Debt Settlement services. While both services try to help you get out of debt, they use completely different strategies, and they have very different effects on your credit report. Debt Settlement services will be discussed in a later post.
Debt Management services is frequently offered by non-profit companies and is focused on helping you find your way out of debt by working with your creditors to reduce interest rates and restructuring the payout term to either lower your monthly payment or satisfy the debt sooner. Not only do these companies work with your creditors, they also work with you personally to help you develop habits that may help you stay out of financial trouble in the future.
With Debt Management, the focus is on restructuring your debts, not on reducing the principal. You typically pay your debts in full, but on easier terms. As a result, any damage to your credit rating may be small and temporary compared to other options. Overall, you may see more significant and quicker improvements to your credit score using this strategy. This, however, requires a lot of discipline and hard work. New habits do not come easy. But for those who are able to make their personal and family finances a top priority and pay their restructured debts on time every time, this strategy offers a way out of debt and the tools to stay out of debt.