What do Debt Management Companies Do?

If your small business runs into financial problems, you’ll need a place to turn. Click here to learn what debt management companies do and how they can help.

Managing your finances isn’t always easy to do. It’s the exact reason why 73% of American consumers die in debt. On average, Americans owe roughly $61,000 (including mortgage debt).

Yikes! That’s a big hole! Now, it doesn’t mean everyone who’s in debt is irresponsible. In fact, going into debt is the only way for most people to get a car, a house, or go to college.

The problems come when you have too much. This is where debt management companies come into play. When you fall into debt – for whatever reason – and can’t get out, you can get professional assistance.

If you’re considering going this route, you may wonder what debt management companies do. This article will shed some insight into the services they offer so you can make a more informed decision.

Debt Management Companies Collect Payments

Debt management companies can manage payments for all of your accounts. Say you owe money to multiple collection agencies. They will bill you one payment each month and then distribute the money to the proper accounts for you.

It sure beats juggling it all on your own.

This is much like what Pembroke Capital Management does for clients who need help managing debt for commercial real estate.

These agencies have preset arrangements with various financial institutions, which in turn help to lower fees and interest rates. This way, your payments go only toward the debt you owe, not late fees.

Receive Debt Counseling to Prevent Future Financial Woes

It’s important to understand what it is you did wrong so that you don’t continue down the same destructive path. You can find debt management companies that offer counseling services to help analyze your spending habits.

This will ensure you can afford basic expenses so that you stay out of debt. Counselors will also help you identify better alternatives if debt consolidation isn’t right for your situation.

You’re Not Signing Up for Bankruptcy

Don’t get debt management confused with filing for bankruptcy. When you sign up with a debt management service, you’re getting assistance with doing just that – managing your debts. They don’t disappear.

You will pay back 100% of your debt obligation so that you can eventually become debt free. When you file for bankruptcy, it removes your debts, but then you have a bankruptcy filing on your credit report. This can hurt your credit rating and make it difficult to get financing in the future.

With a debt management company, you don’t have a red flag on your credit report. Instead, your credit score is rising with each payment you make to your debtors.

Not All Debts Are Covered

It’s important to check which debts a debt management company will help you with. Some companies will only help you with certain debts. For instance, some don’t cover secured debts, such as for cars and houses.

Student loans are also not covered by certain agencies. Each creditor is contacted by the debt manager to notify them of the debt management plan. The debt management company will become the payer on your account.

The counselor will also seek concessions from the creditors to re-age the account so that it no longer accumulates late fees.

All Payments Are Made Electronically

Most people obtain debt management services because they either lack the time or know how to do it themselves. When you sign up with debt management companies, you’re also setting up automated monthly payments.

This way, you will never forget to make your debt payments each month and fall further behind. The payment goes directly to the debt management company and they disperse it to multiple accounts.

Keep in mind that if you miss payments, the creditor may revoke any concessions agreed to, messing up your debt management plan.

No New Lines of Credit Allowed

As part of your deal with a debt management service, you will have to forfeit applying for new lines of credit. This will ensure you don’t fall further into debt. You may have to make a deal that you won’t apply for any new loans or credit cards until your debts are all paid off.

You’ll also find that some credit card issuers require the account’s closure. Some will allow you to keep the card for business or emergencies. It’s a good idea to ask about this before you sign up for debt management just to make sure.

The Ultimate Benefits of Using Debt Management Companies

Now, there are various benefits associated with signing up with a debt management company. For instance, you can quickly pay down revolving debt. All of your debts combine into one monthly payment, making it easier to maintain and afford.

It’s a great opportunity to finally put debt behind you. And it’s something you can use for your personal or business finances. There are agencies that deal in commercial and personal debts from real estate, lines of credit and so on.

You’re a great candidate for debt management if you are able to pay secured debts, such as your car note and mortgage, as well as food, utilities, and other necessities.

If you can’t meet these financial obligations each month or want to continue using your credit cards, then debt management services aren’t for you.

It’s important to note that debt management companies don’t loan out money or settle your debts. All they do is help you manage your payments.

Learn More About Managing Your Finances

If you’re a small business owner or entrepreneur, then you know how difficult it can be managing your own finances. Even with the right tools and software, you can run into financial hiccups.

At Small Business Brief, we publish content that can help you better manage your business operations and finances. Stop by our site today to see how we can help guide you to becoming a better business manager.