People are always using some of sort of credit to meet their everyday requirements. The role of credit has turn so essential part of human living that practically every person whether it’s teenagers or grown up adults who are borrowing money. On top of that, the faltering economy has worsened the monetary condition of all the middle income house hold. People are using credit cards and equal financing options even if they can’t repay the loan money back. As a result, they incur huge debt. Lastly, there comes a time while they can’t manage their debt and embark on a search for debt relief to prevent themselves from insolvency.
People will be happy to know that there are several Federal Trade Commission and Consumer Protection Bureau sanctioned debt relief programs offered by debt relief companies that are truly providing debt assistance. However, people may be interested to know how these companies work and provide solutions to debt problems.
Performance of debt relief companies
Debtors can personally speak to a debt counselor working in the debt relief companies or reach them via email or phone. Debt counselors are expert in debt laws and have the needed experience to advice on situations where a debtor is facing lawsuits from his creditors. They have the necessary skills to manage with the creditors and make a debt repayment plan or debt management plan that will profit everybody involved in the debt mess. They act as guide as well as financial planners to come up with a budget for the debtor to follow. Debt counselors train people how to manage finances and stay out of debt.
In a debt management plan made by the debt counselors, debtors have to follow a systemic payment rule every month. The paid sum is received by the debt counseling agency. It is the job of the debt counseling agency to distribute the paid money between the consenting creditors. Mostly, the debt management plan lasts for about 4-5 years.
Implications of debt relief programs
There are various implications which a person must be aware of earlier signing onto any one of the debt relief programs:
a. Credit rating – Taking advantage of debt relief programs doesn’t necessarily affect one’s credit score directly but may have an indirect effect. Credit score may hurt a setback because many credit accounts are closed as part of the debt management plan. This reduces the credit history of a person subsequently lowering the FICO score.
b. False promises – Debt relief companies cannot assure to reduce debt amount. This is because debt counseling companies may ask creditors to lower the overall debt amount and let off additional charges. However, it is the sole choice of the creditors whether or not to oblige with the request.
c. Financial discipline – Debt relief companies inquire debtors to follow a strict money management authorities, so that they do not get back into the debt problems all over again.
In order to improve one’s credit score a debtor has to save money and pay off his/her debt as soon as possible. Moreover, one should keep a track of his/her credit report and correct any sort of discrepancy in it. These steps are a lot helpful to better credit score.