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There are different types of debt repayment program to choose from and an almost limitless choice of companies who provide them, so this article will help you understand which type of program may be best for you and how to go about finding the best company to provide it.
The most appropriate system to use to tackle a serious debt problem will depend on the exact circumstances, but one of the most commonly used solutions for significant amounts of consumer debt is a debt management plan. These are what most people think of when they refer to a debt repayment program. Under this type of scheme a debt management company will set up the debt repayment program for you, dealing with your creditors on your behalf.
The plan will involve the debt company negotiating with everyone you owe money to, to set up revised terms for the repayment of your debts. They will try to change the terms of the debt so that you pay less interest and perhaps get any late payment fees or penalties reduced or written off. What you end up with is a debt repayment program that brings your debts back within what you can afford to pay. You make a single monthly payment to the debt company and they pass this on to the creditors. You only have one amount of money to find and no longer have the hassle of creditors bothering you for money every day.
This type of debt repayment program can only be set up if your situation meets certain requirements. Any kind of debt repayment program can only be applied to unsecured debts, so you are not able to include a mortgage or home equity loan. Your debts will need to be to more than one creditor, and will normally have to be above a certain amount, which will vary depending on the company you talk to. You will also need a source of income that leaves you with enough money spare each month to cover the amount for the program payments.
If your circumstances are such that you do not have enough money to afford the payments on a debt management plan, then you may need to consider a different type of debt repayment program. The alternative in the US, for very serious situations, is known as debt settlement, or debt negotiation. In the UK it would be an IVA.
The main difference between debt settlement and the debt management plan is that with settlement you do not aim to repay the debt in full. The debt repayment program already described is intended to make it possible for you to repay everything you owe, whereas debt settlement is about writing off as much of your debt as possible in order to make it possible to repay the rest.
A debt settlement company will negotiate with your creditors and use their knowledge and experience to secure agreements for writing off up to 60% of each debt in return for paying off the rest in a lump sum. This can take some time, but from the start of the program you stop making any payments to creditors and put money instead into a new account which is set up specially. This money accumulates and is used to pay off creditors when agreements are achieved.
Whichever kind of debt repayment program you think would be most appropriate for your situation, you will need to ensure that you only deal with debt companies that you know you can depend on. You need to know that searching randomly for any organisation that offers a debt repayment program can be dangerous, as some companies are only out to take money from you.
You must find debt companies that will not only give you unbiased advice, but who can demonstrate that they walk the walk in terms of actually getting people out of debt. The safest way to avoid problem companies is to follow recommendations for the most reputable and reliable debt companies. If you have a list of organisations that you know to have been around for some time and have a long history of satisfied customers, then you can apply to perhaps three of these and go with whichever you feel best about.
