There has been a substantial increase in the number of debt management companies in the recent years. This can be attributed to the fact that there has been a catastrophic rise in the number of bad debt cases.
A debt management company is primarily built to help individuals manage their debts in a better way. Many debt management companies offer financial counselling too, this is an effort undertaken by the companies, to help individuals plan their finances better, as well deal with the debt in a better way. Most companies offer a telephone number or an appointment line, which allows customers to dial in or meet someone personally to get some ideas on how they can handle their debt in a better way.
Before choosing a debt management company, customers can read reviews about their services and offerings online. Reading reviews will give you a great insight on how a certain company handles debt related cases as well as information on the techniques they use to help in reducing debts. This is one way of figuring out which debt management company would be right for you. There are a number of other ways you can use to judge if a debt management company is giving you the correct advice or not.
Debt Management Plan
A debt management plan is something that the executives at debt management companies are trained to do. They need to chalk out plans as per the client’s financial condition and give work out something that will make sense. So, for instance, the executive needs to look at your income and expenses, plus any other loans that you may have. Based on all the information you provide, they will work out a customised plan just for you. Here, you need to be extremely honest with your debts and mention each and everything. Don’t feel ashamed to tell the executive upfront as your debt management plan depends on what you say. If for some reason you don’t mention or forget mentioning about a debt, the plan that they prepare will not work for you. You’ll realise that you’re spending more than you’re earning, which is not ideal at all.
Approaching Debt Management Companies
When you approach a debt management company, you need to proceed with caution. There are a lot of scam companies that will charge you for their advice plus end up extracting a lot of money from you without a proper solution. Essentially, the main aim of a debt management company is to negotiate a deal with your creditors, so that you are able to easily pay off your debt. Usually, most of the companies will charge a fee as well, but, consider the following points before you go ahead and pay for their services blindly.
- Is the advice provided by the debt management company really free? Are they charging you for something that’s supposed to be free?
- Do you really need a debt management company or are you able to manage your debt on your own? If you need an expert’s advice, how much help do you really need?
- Are you willing to make payments on your own?
- Are the fees that the company mentioned worth it?
You also need to consider a number of factors when you’re looking for a debt management company.
Can you repay the debt quickly?
If you’re able to manage your debt and pay the maximum amount, then your debt will end quickly. There are many plans where your minimum contribution needs to be only £1 per month. No doubt, a very attractive option, but, you’ll end up being in debt for the rest of your life. So, you need to pay as much as you can afford to get rid of your debt quickly.
What are the charges levied by the debt management company?
Usually, debt management companies charge about 15% of the repayments. Depending on the company, there may be other administration charges and other fees, but, the fees need to be set-up only after you’ve agreed upon a debt management plan. No company will charge you a fee before the plan has been set-up.
One thing that you need to keep in mind is getting into a debt management plan may affect your capability of getting credit in the future. So, if possible and viable, try and manage your debt on your own. Although, debt management plans are great for someone with a temporary problem.