When seeking financial help for mounting debt problems – from loans, credit cards, store cards, payday loans, mortgages or any other type of debt – customers will obviously want to choose the services of the right debt management company. There are two main types of debt management companies which a person can consider – commercial companies or free companies/charitable organisations. Both options will help borrowers organise their debts by giving confidential advice and devise plans for effective debt management. The differences between the two, however, are the costs involved and the fact that the advice given by companies that charge a fee for debt management may not always be impartial.
Fee Charging Debt Management Companies
Though most organisations should provide initial advice free of charge, fee-charging debt management companies have ways to ensure their customers have no choice but to pay for their services. They are approached by some debtors as they can often deal with problems quickly and can act as negotiators between clients and lenders. In return for such involvement, customers will usually be charged at a steep price of about 15% – or perhaps even more – of any amount paid into a debt management plan. These charges are usually not paid up front, but are taken as part of any monthly payment. Given this, it is important to realise that though there is no need for the borrower to hand over any money outside any scheduled debt repayments, these services are certainly not free; indeed they can be quite costly and end up prolonging the time it takes for the borrower to pay off their debt.
Free Debt Management Companies
By contrast, free debt management companies and charities provide services with obvious benefits when compared to fee-charging ones. Though people may consider a small fee worth paying for getting themselves out of debt, there is nothing to suggest that free organisations offer a poorer quality of help. A free debt management company or charity will pass on 100% of their client’s monthly payments to any banks, payday loan companies, peer to peer lenders, online lenders or other lenders they are indebted to – so all their money goes towards repaying their debts. They can often also work on debt consolidation if required, as well as special agreements like Debt Relief Orders, Individual Voluntary Arrangements and the setting up of special bank accounts for those who have a bad credit rating and have to close their present account as part of any deal.
Fee-charging companies do still exist for a reason, usually due to the fact that there are fewer advisers working in free debt agencies so it can take weeks for an appointment. Nevertheless, non-fee companies are always considered better options as they are guaranteed to give debtors truly objective advice in any attempt to handle debt or avoid bankruptcy rather than being biased by commercial incentives.
Debt Management Programs
Whatever the cost, a tailor-made debt management program can be devised by all debt management companies. Debt management programs – like debt management plans – can help people work out a payment schedule most suitable for them and their lenders in order to get out of debt. By liaising with their creditors, borrowers can work out a monthly amount they can afford to repay over a certain timeframe. Though customers can approach their lenders themselves, a debt management plan is best overseen by a professional who can negotiate reduced repayments on their behalf. A person will only make one payment each month straight to their chosen company, who will then distribute this money accordingly to each lender. The best debt management companies will also be able to persuade lenders to freeze interest payments and other charges, allowing their clients to repay quicker.
Compare Debt Management Companies
Though it is clear what the best debt management company is believed to be, people with debt issues should still compare debt management companies to assess what organisations provide the most appropriate service for them. Debtors may in fact benefit from using a fee based company, particular if they are facing a debt emergency and cannot afford to wait a number of weeks for a consultation. However, in the vast majority of cases if a borrower is in such an unmanageable state of debt, obtaining free debt advice is usually by far the best option they could consider.