A debt management group helps consumers regain their good credit rating by consolidating bills into one easy monthly payment. A debt management group works with creditors to accomplish a settlement. At the initial appointment, the debt management group specialist will evaluate debt and find an affordable solution, usually made in monthly payments, to the debt management group. Creditor contact and all transactions of bill payments are taken over by the debt management group. All accounts are consolidated into one manageable monthly payment by the debt management group. Monthly payments are distributed to the creditors on the same day each month.
Credit ratings are determined by two factors: payment history and the amount of debt, or debt to income ratio. Any debt management group program will affect credit in the beginning. As the accounts achieve a zero balance, even if payments are still due, ultimately debt will be lowered and the income to debt ratio will improve your credit score.
The time it takes to settle with creditors varies depending on monthly payments. With the help of a debt management group, on average, debt can be paid off in 15 to 30 months. Paying the creditors on your own could literally take years, and because credit companies deal with people in debt on a daily basis, negotiating a deal by yourself may be difficult and stressful. A debt management group can negotiate with creditors to eliminate high interest rates for payoffs, sometimes dropping the interest or settling for no interest at all. Over-limit fees and late fees are also eliminated by the debt management group.
When using a debt management group, not all debt has to be included in the consolidation. Experts recommend though, that all debt should be exposed to the debt management group specialist, to find the best solution available. Most or all of unsecured debt should be included. Unsecured debt is a debt for which a credit holds no collateral or property that they can take back if a debtor fails to pay. Unsecured debt includes: credit cards, department store cards, cell phone bills, collection agencies, medical bills, legal bills, magazine and record clubs, the IRS, and personal loans. Examples of a secured debt are: cars, boats, and houses. Secured debt is not included in the consolidation with the debt management group.
A debt management group can assist consumers to regain a good credit history faster than bankruptcy will. Bankruptcy to eliminate debts can cost approximately $1,200- $1,500 just to file and remains on your record for at least seven years. Working with a debt management group can help so that your credit history is clean in less time.
The not-for-profit Credit Counseling Foundation offers free debt consolidation counseling. Debt consolidation allows consumers to avoid drastic steps to improve credit history and credit ratings. Many payments, on average, can be reduced to 35 percent of the original debt, making the bills easier to pay and you only have to worry about one very convenient monthly payment. Debt consolidation can work if the client does not increase the amount of the debt he or she is in.
By R. S. Wagner