No one wants to be in a situation wherein they are dealing with mounting debt. However, it happens more often than it should because it is quite easy to fall under the debt trap of borrowing more than what you can actually pay for. Once you get into the habit of swiping that piece of plastic, it might be difficult for you to monitor your spending.
Now, let us say that you have already committed the sin of borrowing more than what you can afford. Once you see that you are allotting more than 20% of your pay check to credit card debts, it means that you are quite neck-deep in debt. If you are unable to pay even the minimum amount against your credit card bills, it could be time for you to consider hiring a debt company to consolidate or manage your debts in your behalf.
What A Debt Company Can Offer You
Depending on how much you earn and how much you owe, there are debt companies which offer different services which may just solve your financial problems. To give you an idea, here is a quick list of the services that debt companies offer:
Debt Consolidation Loans
There are debt companies which specialize in debt consolidation through lending you more money. Let us say that you owe debts to four different credit card companies. A debt consolidation loan company will offer you a loan which will allow you to pay off your existing debts, so that you will only owe one company. Does not really get rid of your debts and you often end up paying more in the long run.
Debt Management Plans
This is probably the most desirable option out of all these when you have more than one lender reminding you to pay off your debts. A debt management plan is something that debt management companies will set up for you. Once you hire their services, they will be assessing your current financial situation so that a solution to the financial mess that you are in can be found. Usually, the representative from the debt management company will negotiate with your different lenders so that a lower monthly payment and lower interest rate can be given to you. You make one payment each month and it is shared about among your creditors.
Debt settlement companies specialize in taking care of your credit card debts, which is an alternative to filing for bankruptcy. This is only an option in the US.
Individual Voluntary Arrangements
These are only available in the UK and they are a way of writing off a lot of your debts. You make an affordable payment for five years and after that you are free of debt.
Beware of any companies which promise to repair or fix your low credit score. If you have more debt than you can handle which affected your credit score as well as your purchasing power, remember that the process to rebuilding credit is quite slow. No-one has the power to change this and anyone promising to is lying and should be avoided. Continue reading