It is commonly recommended that you try and work with your existing bank when looking for a debt management solution. However there are many companies that call themselves that management companies that offer solutions to consumer debt problems. Choosing a debt management company can be a tricky affair and should be done extremely carefully. The management of debt is a crucial exercise that will go a long way in determining the future of financial freedom and security. Before you place yourself in the hands of a debt management company issued to all that you can to make sure that your finances are in the right place. The following are a few points that you should check on in order to decide which debt management company to work with.
Check with the Better Business Bureau for Complaints
While you can expect to see some complaints for almost all businesses that you check up on with the better business bureau, all or at least the majority of them should have been resolved by the company to the satisfaction of the consumer. Checking out a debt management company or any other business with the better business bureau is an easy process. Simply was it their website www.BBB.org.
Advice to Stop Paying Your Creditors
Sometimes a debt management company will ask you to deliberately stop paying your lenders. They might tell you that you will be in a better position to negotiate lower rate of interest once you have stopped paying them. In some cases the payments are deliberately withheld for 60 to 120 days. Usually a creditor reports non-payment to the credit bureaus once the payment gets delayed for more than 30 days. If this information finds way on your credit report it will damage your credit score for a long time. Negative information such as non-payment or a delinquent account will stay on your credit report for a period of seven years from the original date of delinquency. You must make it absolutely clear with the debt management company as to when they will start the repayment process with your creditors. Till then, if your payments have been current, keep them current and only stopped paying them when the debt management company takes over.
Some debt management companies tend to pocket the first couple of payments that you make towards the payment of your creditors. Make sure that this is not the case with the debt management company you are dealing with.
A Pseudo-Nonprofit Status of a Debt Management Company
There are several credit counseling agencies and debt management companies that will assist you for free or for a very low cost. Many debt management companies will convince you of the non-profit status in to justify their high fees as being legitimate. The truth is that certain states require credit counseling services to be non-profit agencies in order to function. While this is that this may be true on paper a debt management company may try to cause you into making a forced donation as they are not allowed to charge a fee directly. You should be aware of the fact that in the recent times the Internal Revenue Service has revoked the nonprofit status several credit counseling services. If a debt management company claims to be a non-profit organization don’t just take their word for it. Ask to see their certification. The fact remains that you can get debt management solutions at a very reasonable cost no cost it all as many of them receive their payment from the creditor as what is known as ‘fair share’.
No Details about the Account of Payment
Whenever you use a debt management company to make the payments your creditors the company should provide you with a statement every month in order to disclose how they have dispersed the money amongst your various creditors. You should have a clear indication as to how your money is being utilized to pay off your debts.
Absence of a Written Contract or Agreement
It is a common exercise to get in touch with the credit counseling company or the debt management company over the phone or the Internet. Do not commit yourself to a debt management programme without first having the terms and conditions of the contract in written. The contract should contain all information about the fee that they will be charging and the manner in which the payment you make every month will be utilized to pay off your creditors. Don’t hesitate to disagree or argue over any terms of conditions that are not conducive to your circumstances. If you feel that the terms of the contract are not reasonable, look elsewhere.
False and Exaggerated Claims
It is a common claim by debt management companies to remove negative data from your credit report. Nobody has the power or the authority to remove negative information from a credit report that is accurate. Only the inaccurate information can be removed by a process that is called disputing the error with the credit bureau. This is something that you can to yourself quite simply by ordering a credit report and then filing a dispute online which is the easiest, or by phone or e-mail. What a debt management company can do to you is attempt to negotiate with your creditors for a change in the terms and conditions of the loan such as lowering of the interest-rate, waiver of the late payment fee and other financial charges.