If you feel like your back is against the wall due to the mounting bills and harassing phones calls from creditors, and you’re living paycheck to paycheck, working with debt consolidation companies may be your best bet. But what is debt consolidation and can it actually help you survive during a time of financial hardship?

Basically, debt consolidation involves combining several of your payments into one low monthly payment, one that’s manageable and allows you to steadily chip away at your debt. Often, many people attempt to manage their own debt by paying the minimum payment due each month, but if you have high interest rates, you’re essentially digging yourself a deeper hole.

This is where debt consolidation companies come in. But because many Americans are struggling to pay down their credit debt, the idea of paying for this type of service can seem almost impossible.

It’s a common misconception that these debt management companies charge too much to make using their services feasible in a time of financial hardship. But in fact, many companies offer lower rates than you’d expect.

So, how do these companies work? Read on to find out.

 

How Working With a Debt Management Company Can Give You Peace of Mind

Even people who are normally great at managing their money can hit a bump in the road and benefit from using a company that can help them better manage their monthly debt payments. These companies often work with clients who are having trouble dealing with pushy creditors who ask for higher payments every month or begin with their harassing phone calls at both a person’s home and their place of work. This type of added stress does nothing to help when it comes to finding a debt solution and can often lead to people filing for bankruptcy or taking out a debt consolidation loan, just to sleep better at night.

These debt management companies offer people heavily in debt a better, more effective solution to solving their complicated financial situation.

Here are some important points regarding how these companies work:

•    Many of these companies are accredited. Their debt specialists are highly trained and knowledgeable, which makes them better able to argue with creditors in your favor regarding low monthly payments.

•    To use one of these companies you must pay a monthly service fee. This fee is included in the low monthly payment you put towards paying off your debt.

•    When you work with one of these companies, you no longer have to deal with creditors. The debt management company will take over all communication, which for many, is a huge load off their mind.

•    You’ll work closely with debt specialists to determine how much money you can set aside to put towards your debt every month.

 

Is Debt Consolidation a Smart Move?

is debt consolidation a smart move?

Some people feel that these debt management companies charge service fees that are too steep. Why would you want to pay someone for something you can do for free?

If you’ve ever spoken with your creditors before, then you know, most debt collectors make it impossible to pay a reasonable, lower monthly fee. In fact, with every phone call, they’re trying to get more money out of you. Debt specialists are actually well-trained to negotiate. They can’t be pushed around by your creditors. They use professional, strategic methods to negotiate a lower payment or interest rate, making it possible for you to pay your debt off faster.

 

How to Pick the Best Debt Management Company for you

If you decide to sign up with a debt management company, we recommend following these basic guidelines:

•    Visit the Better Business Bureau website. The BBB will provide you with information on each company, so you can determine if a company offers competitive rates, look at accreditation information, and take a look at consumer reviews regarding service experiences.

•    Learn all you can about their pricing before you commit to enrolling. If a company is reputable, you’ll be able to speak with someone in person or over the phone and get a straight answer regarding monthly service fees. Of course, many of these companies will charge you based on your monthly income and level of debt. Make sure you have a clear picture of what this service will cost you, in addition to how much money you’ll be expected to pay towards your debt before you enroll.

•    Don’t be afraid to shop around. Many of these companies offer free consultations. During this time you can discuss payment for services, customer support, the length of the program, and any other concerns you may have. Again, ask these questions before you sign up for services.

As you can see, it will take a little research to find a reputable company that’s right for you.

 

What Types of Debt Consolidation Plans are Available?

There are a couple of methods of debt consolidation. Both of these methods achieve the same results but they do differ in their approaches. Your success and financial goals can depend on your ability to understand these differences and choose a plan that best fits your financial needs.

Debt management is a strategy that involves consolidating all unsecured debt into one monthly payment that you will send to the debt consolidation company. The company is then responsible for distributing the money to all of your creditors. A debt specialist will work directly with your creditors in order to secure benefits that will help you to fulfill your financial obligations over a determined amount of time. These benefits can include reduced monthly payments, late fee waivers, and lower interest rates.

A debt settlement plan often works for people who are unable to pay their debts off in full and are on the brink of bankruptcy. With this type of arrangement, the debt management company will work with your creditors to negotiate in the hopes that your creditors can agree on a reduced total cost of the amount you owe. Once they have negotiated with your creditors and reached a settlement, you’ll pay a low monthly fee that helps you to slowly pay off each of your creditors, without having to worry about accruing additional interest.

A debt management company will help you to pick a plan based on your ability to make regular payments, the type of debt you owe, and your income.

 

What Type of Service Can I Expect?

Not every company offers the exact same type of services. You’ll want a company that offers a variety of plans and debt specialists who are able to guide you to the right debt management solution based on your needs.

Contact each company you’re considering and discuss the different types of services they offer. You can then compare each of these companies based on the different plans available, the services and resources they offer, and their client success rate.

Many of these companies offer more than just debt payment plans, so look for one that will not only help you to climb out of debt but also focuses on educating you regarding how you can remain debt free in the future.

Some of the services you should look for include: 

•    Twenty-four-hour access to your account

•    Customer support

•    Money management tools such as budgeting worksheets and calculators

•    Free educational resources

•    Credit repair programs that are available after you have completed the debt consolidation program

 

How to Spot a Bad Debt Consolidation Company

If you fail to choose a reputable company, then you may end up in a worse financial situation then when you started the program. To prevent ending up with an unethical debt consolidation program, follow these tips:

•    Never accept a consolidation program if the company hasn’t even reviewed your finances.

•    Avoid companies that promise you can use government money to pay off your debt.

•    Take a careful look at the monthly service fees they charge. A major red flag is a company that wants to begin charging you for services before they’ve been able to successfully negotiate with your creditors.

 

The Best Debt Management Companies in the Industry

Consider only accredited companies. Focus on identifying a company with an excellent reputation, which will make your creditors more willing to negotiate. A debt consolidation plan will work more effectively when you choose an accredited reputable company, stick to their plan and learn how to avoid the same mistakes that got you into debt in the first place.

Some of the top debt consolidation companies in the industry include:

•    Accredited Debt Relief

•    CuraDebt

•    Freedom Debt Relief

•    Consolidated Credit

•    National Debt Relief

 

Debt Consolidation Company Comparison Chart

CompanyFeesAdditional FeesServices OfferedMinimum Amount of DebtProgram Length
Accredited Debt Relief25%NoDebt settlementUS$7,5002-4 years
National Debt Relief15-25%NoDebt settlementUS$7,5002-4 years
CuraDebt20%YesDebt settlement, Debt consolidation, Tax relief, Credit repairUS$7,5002-4 years
Freedom Debt Relief15-25%NoDebt settlementUS$7,5002-4 years
Consolidated DebtFees depend on amount of debt owed.YesDebt consolidationNo minimumProgram length depends on how much debt owed.

 

Enrolling in a debt consolidation program through one of these companies can help you to actually make progress towards a debt free life. You’ll also learn valuable information regarding how to improve poor money management habits, how to create your own monthly budget, and what you can do to repair your credit once you’re out of debt. Only by using the best debt consolidation company and the right plan will you be able to survive your debt.