Debt agreements are a means of reducing the amount of debt that is outstanding by the creditors. They are a legal, binding contract involving both parties. You will be advised by a debt management company if you are eligible for such an agreement. Once you have decided to go for one, there are many things that need to be considered.
The first thing to remember is the need for a debt agreement as soon as possible. Once your financial situation has become dire, you should take steps to get debt relief. Creditors would be more than willing to negotiate and reduce debt on your behalf, if they believe that doing so will benefit them as well. Make sure that you inform the credit companies of any changes in your finances so that you can report these changes accurately to the credit reporting bureaus. This will improve your credit rating and may help you qualify for debt management services.
When you decide to use a debt management company, look for those with good track records and a lot of experience. Ask for testimonials and recommendations from people who have used the service. You need to also consider the fees charged by each company. There are several firms that offer debt management services at different levels of expertise. It pays to shop around to find the best deal.
Make sure that you choose a debt management company that does not charge excessive fees. Make sure too that the company does not have a conflict of interest. If there is a fee for signing up for the debt agreement, the company should not impose it unnecessarily and ask you to pay it before they give you the debt management services.
The debt management company should be able to negotiate with your creditors on your behalf. They should be able to lower the interest rates charged on your accounts and even get some fees waived. The terms and conditions of the debt agreement between you and the debt management company should be fair to both parties. Avoid companies who ask for an upfront fee. They should not ask you for money in advance just as long as they keep you up to date on your payments. They should also never tell you to stop paying your debts until all debts are settled.
A debt management company can also help you work out a budget. If you have experienced financial problems in the past few years, this could be very helpful. The debt management company can provide budgeting advice and help you set up a payment plan you can follow. This is especially useful if you have many debts and can be confusing when it comes to figuring out payment plans for all of them.
Be careful of any debt management firm that tells you that you can get rid of your debts without having to deal with creditors or other third parties. They may be able to reduce your debt to a level where creditors will be willing to settle but you will not be able to pay it off. Instead, they will advise you to transfer your debt onto a lower interest credit card. Remember that once the debt-management agreement has been signed, you are officially trapped in that agreement unless you negotiate a new one with your creditors. Your credit card will remain in place and they can make any changes they want.
Before signing any type of debt agreement or contract, do your research. Learn about the debt management company you are thinking of hiring and the services they offer. If you feel uneasy about anything, don’t sign. If the debt management company doesn’t explain their fees or what kind of charges they might be making, don’t do business with them. You should also check their background carefully and see how long they have been in business. It’s also a good idea to check with the Better Business Bureau to see if there have been any complaints filed against the debt management company and how the matter was handled.