What is debt management and is it for me? 5 Key Rules every Consumer Should Know
We know that individuals often feel overwhelmed when they come to a point in life where they must ask for help from a credit counselor or debt management specialist. Without some specific guidelines to assist them along the way, many may make poor decisions and, in the long run, only compound their original financial problems. But what is debt management, and what does it really involve?
Debt Management, defined simply, is a process by which creditors offer lower interest rates to allow a consumer to become debt free in 3-5 years verses 15 years to “Debt Never Paying Off.” Debt management is usually offered by certified “Credit Counselors" through a certified company as is the case with CAPC. These offer what is called a "debt management plan (DMP)." You make one easy payment per month to the service provider to pay down consumer credit card bills.
Choosing a debt management service provider is not something that should be taken lightly. What do you look for the right firm? There are dozens of factors to consider, but these 5 key rules to choosing a credit/debt management firm can make the process less stressful and may get you much closer to financial comfort faster and easier than you ever thought possible.
1. Get a Referral - Ask someone who has been in a similar situation. Take time to ask questions, to determine if they had a good experience with a particular firm or a bad experience. Getting information directly from another consumer who has used credit counseling or debt management in the past is an excellent way to learn before you agree to pay for services. In addition, a reputable company should be willing to provide examples of good results, without revealing another person's private information.
2. National Accreditation - While no specific national or state accreditation will guarantee success, there are organizations in the U.S. promoting high standards and ethical practices in the consumer credit industry. The Association of Credit Counseling Professionals is one of the most prominent in this industry. Members of this organization specialize in credit counseling, debt management plans, budget/finance industry education and much more. CAPC is proud to be a member of the above trade organization.
3. Better Business Bureau Member - Contact the Better Business Bureau for information about CAPC. www.bbbonline.org online for the BBB and has been awarded its coveted "Reliability Program Online Seal" View our BBB online certification here.
4. For Profit vs. Non-Profit Experience - Many consumers have a misunderstanding about Not-For-Profit debt management companies vs. For-Profit companies. They both offer concessions for the consumer whereas some states require non-profit status of the company that can do business in the state. Credit card companies fund most Not-For-Profit credit counseling companies with Grants and Fairshare donations as a way of compensating them for recovering money from consumers who are not current on their payments. The biggest difference is that a Not-For-Profit does not pay taxes whereas a For Profit does. Study the company carefully to see if it uses "non-profit" status simply as a marketing tool. In addition, you should select a firm that has been in business for a number of years, such as CAPC, so that they have a track record you can see.
5. A Written Plan - A reputable credit counseling firm or debt management company will take time to review your situation, help you with budgeting and money management, and put your individual plan in writing. This personalized plan should include details on how creditors will be paid, as well as realistic goals for returning you to full financial health. Some firms even offer a free debt comparison quote which is an excellent way to see how much money you can save, what your new interest rate may be and how long it will take you to get debt free on your debt consolidation program right out of the gate. Unrealistic promises should not be part of the plan. For example, a debt management or credit-counseling firm does not have the authority to change your credit report nor should it ever imply it has done so in the past.
Before taking these above few key steps toward resolving your debt, look closely at your current budget to determine if you can pay your true minimum payments or even a bit more than the minimum on your debt. If so, you may be able to rebuild your credit or handle your debt situation privately without the assistance of an outside counselor. If this is not possible, it may be time to call in professional help.
Coming face-to-face with financial trouble may seem to be more than you can handle, at first blush. Fortunately, there are many reputable credit counselors and debt management companies out there who can help get you started again in the right direction. Following these 5 simple guidelines when choosing a firm will go a long way in ensuring you final choice is also the best choice for your current financial circumstances.
Thanks for visiting Consumers Alliance Processing Corporation today. Please check out our free debt comparison program or contact us today for more information on our programs. Take control of your finances today for peace of mind, we can help! If you want to stay up to date visit our Debt Management News page.