Do you have debt collectors on your back? Most people try to hide from
debt collectors. This, however, is not a good solution. A better idea is
to seek the aid of debt counseling services, and bring some sanity to your
financial affairs.
These services negotiate with your get
discounts, creditors, obtain late-fee waivers etc. They also consolidate
all your debt into a single lump-sum, so that you make one payment a month
instead of several. Also, this payment is made to the debt reduction
company, which then pays the money to the creditors.
The debt
counseling company also gets the debt collectors off your back. You no
longer have to get threatening calls or nasty mail. The only disadvantage
is that, the moment you acquire the services of such a company, you loose
several credit points. The creditors realize that it is not completely
safe to lend money to you.
This, however, is preferable to having a
record of continual late or missed payments. In fact with time, most
creditors are willing to overlook the renegotiated interest rates in your
records since it shows that you are honest, and trying to clear all your
debts. This is what the creditors want. They certainly don't want you to
declare bankruptcy.
Basically, the debt counseling company acts as
a middleman, taking a percentage of your monthly payment and possibly the
benefit of additional rebate from your creditor. It is typical for these
firms to charge up to 10% of your monthly payment as their fee. Sometimes,
they get you to pay larger monthly installments and then get a kickback
from your creditors for giving them a larger EMI! You should therefore
make sure that you sign up with a firm that has a reputation for keeping
your interests a priority.
You need to know what happens if you
miss an installment. After all, the habit of missing payments is what got
you to their door in the first place. Also, choose one of the accredited
firms from the Association of Independent Consumer Credit Counseling
Agencies or the National Foundation for Credit Counseling. These firms
will be more ethical and honest in their workings.
Finally, you
need to bring some financial discipline in your life. Otherwise, the
efforts of reducing your debt will go waste, because you will soon
accumulate more.
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