Debt Management Credit Counseling

Not everyone will qualify for debt management.  If you do not make enough money to  cover your expenses, there is no point in continuing the process since you will not have enough money to pay your lenders.  The counselor may advice you to file  bankruptcy or to increase your income to better qualify for counseling services.  Those that do qualify will move on to the next step in which the credit counselor  will call each of your lenders and determine what the least amount of money they  will take is to pay off your debt on a monthly basis.  Once they’ve worked with  each of the lenders (hopefully reducing the total amount you owe) they will then  work with you to set up an automatic payment amount.  Each month on the same day,  a set amount of money will be withdrawn from your checking or savings account  automatically.

These funds are then split to each of your lenders, according to  the agreements you’ve made with each of them.  You no longer pay your creditors  directly, but through the debt management service. Over time, you will continue to make payments and reduce the amount that you owe  each of your lenders.  You will no longer be able to use any of the credit lines  that are currently in the counseling and you are prohibited from obtaining new  lines of credit.  The process will take time, usually between two and three years  to complete.  During that time, if you stick with the plan, you will work down the  amount you owe.  At the end of the counseling services, you will have paid off all  of your lenders in full and owe them no more money.

Debt Management Credit Counseling

Debt management credit counseling services can help you get out of debt quickly.  Each person’s debt situation is unique; some have more debt, some less. The companies that you have debt through and the type of debt you have also play a role in how long it will take you to get out of debt.  One of the most important determinants of how long it will take you to get out of debt using consumer credit counseling services is your willingness to stick with a plan.

Ultimately, you will need to pay off your creditors and you will need to work to achieve the goals you have by cutting back and no longer using credit.  Doing so will help you to get out of debt.  Most people can use debt management to get out of debt within 2 to 3 years.  You will know how long it will take you once you meet with a debt counselor and work with them to set up the process.

What Is Debt Management?

Debt management is a third party organization that works between you and your creditors.  These companies only work with credit card companies, personal lenders and other unsecured types of debt.  In most cases, car loans and mortgages do not qualify for debt counseling services because they are backed by the assets.  If you cannot pay those debts, the lender will collect the assets from you, sell them and apply the assets to the amount of money you owe on them.  For this reason, only unsecured debt can be used in debt management services.

Professionally trained and educated individuals who are able to work with you to find a solution offer credit counseling services.  That solution is different for every person.  The goal is to come to a consensus with your current lenders.  What do they want you to pay and how much will you pay?  Often times, the counselor working for you will be able to get results from the lenders that you would not be able to get when you work with them yourself.  Because of professional relationships between the counselors and the credit companies, solutions are found in nearly all cases.

Those solutions can be a number of things including: Reducing your interest rate; sometimes the debt management counselor is able to get your interest rate down to 0%, which will help you to pay off your debt faster. Reducing the amount of money you owe; by working with the credit company, the counselor may get fees, interest charges and excessive membership costs removed from the balance you owe, again reducing the amount you have to pay. Reducing the amount of money you must pay monthly; the amount you pay will be based on the amount you can afford to pay, and within the limits the credit lender offers. Counselors can get monthly payments reduced significantly. Reduce the amount of calls you get from lenders for missing payments or over the limits; once the lenders know you are working with a debt management company, they are able to work with you and therefore stop calling your home.

Often times, lenders you owe to will be willing to work with the credit counselor because they know the next step is bankruptcy.  If you file for bankruptcy, what will the outcome be for the lender?  In most cases, they will be unable to collect on the debt at all, which will cost them money in the long run.  Therefore, if you are taking steps to better manage your debt through management companies like this, it is often beneficial to both parties involved to make it work.