Know what to look for and what to avoid when shopping for debt management.
Boca Raton, FL (PRWEB) May 07, 2013
The different types of services offered for debt relief today makes it a little confusing for consumers that do not know the difference between various services. Choosing the right service will be directly related to the particular credit consumer’s individual debt situation. The most common mistake that consumers make is not knowing the difference between “debt settlement” and “debt management.” For consumers that have good credit and are current on their accounts or just slightly behind and want to maintain and improve their credit rating Debt Management is the correct route. Through a debt management program accounts will be paid in full over a shorter period of time, with reduced rates. Debt settlement is a process where account balances are settled for less than the total balance owed and is really better suited for consumers that are severely delinquent on their accounts and have low credit scores already. Consumers that are concerned about their credit scores need to pay accounts in full.
The requirements for debt management programs are predetermined and no negotiations take place. Each participating creditor has a minimum payment requirement for the debt management program and interest rates that they offer through the program. An example would be Chase for an account with a $10,000 balance. Chase requires 2% of the balance for the debt management program and offers an interest rate of 6%. So a $10,000 Chase credit card account would require $200 per month in the debt management program. Some creditors require a larger payment of 2.5% of the balance and some others require slightly different minimum amounts. What is important to note is that these requirements do not change or vary between debt management agencies. In other words it would not matter which “legitimate” agency you chose to handle your accounts, if you had a Chase account as is mentioned above and it was for $10,000 it would require $200 per month and the rate offered would be 6%. With this mind if you are shopping for quotes you should not be getting different payment requirements from different agencies. The monthly fee charged by different agencies may vary by a few dollars but the individual payment requirements for each account should not vary. (Click HERE for info on payment requirements) Here are some key points to watch for when shopping for the right debt service.
1. Make sure the counselor provides individual payment requirements for each account and make notes of what was quoted before calling for another quote.
2. The counselor should always ask what the existing interest rates are on each account before advising whether or not to include them in the program.
3. If the credit score is an issue and the goal is to pay accounts in full be sure debt management is offered with full balance payoff (don’t confuse with debt settlement).
4. The counselor should be able to provide payoff times at the new rates with the required minimum payments both for individual accounts and for all accounts collectively.
5. Beware of unusually low payment quotes, the only variable between quotes should be the monthly fee amount. Click HERE for common warning signs.
6. Be sure that the savings quoted are significant enough to make the program worthwhile. If savings are under $5000 over approximately 4.5 years the same could be accomplished by adding as little as $20 per month to minimum payments instead of paying a monthly fee to the agency.
7. Always review each agencies record with the Better Business Bureau.
8. What is quoted by the prospective agency can be verified by calling creditors directly so an unusually low quote may require this extra step.
For more information on Debt Management visit http://www.debtsynergy.com or call 800-810-5250