Debt management plans are a highly effective tool and probably the best alternative to the frequently devastating consequences of a fully-fledged bankruptcy: If all goes well, they can contribute to keeping your credit rating intact, save you time, reduce psychological pressure and prove helpful in upholding a good relationship with your creditors. One of the reasons why debt management plans are so efficient is because they are simple in principle and offer obvious and immediately visible benefits to both sides. As part of a debt management plan, you are renegotiating both your debt burden and the structure of your debt. You are entrusting a debt management company with dealing with your creditors – instead of managing many different loans with many different creditors, you are henceforth responsible only for a single monthly payment to the company, which then distributes the amount between your creditors. A debt management plan is so strikingly simple on paper, that you may even be tempted to set it up yourself. But is this really a viable option?
There are four good reasons why there are advantages to working with a professional, fee-charging debt management company:
1. A fee-charging debt management company is working in your interest
Many, especially charities, have criticised fee-charging debt management companies for asking money from those already in debt. And yet, by paying such a company, you are providing them with a very good incentive to keep your best interests in mind – after all, should they prove to be unable to deliver on the goods, you will start looking for a competitor. The more a debt management company can do for you, the better it will fare in the long run.
2. A fee-charging debt management company has the required connections
Connections are vital in every part of business life, so why should things be different in the debt management sector? Whether or not a creditor is willing to co-operate with you and to possibly reduce the overall amount to be paid back will depend largely on his trust in your commitment to the new plan. Debt management companies can operate as screening entities in this regard. Since they know many of the big credit-providing institutions in person, deals regarding debt management plans are typically struck quicker and more effectively.
3. A fee-charging debt management company can work more efficiently
A big debt management company has thousands of customers all facing similar problems. This means that they will be able to benefit from so-called economies of scale. Especially the department taking care of the distribution of the money to the various creditors is capable of performing tasks which would costs you hours within no more than a few minutes. As a result, you are freed up from burdensome administrative work and can turn towards the more important duties – time really is money after all.
4. A fee-charging debt management company may actually end up saving you money
For all of these different reasons, you may end up paying back less when working with a debt management company even after deducting their costs from the equation. In fact, a company like the Debt Advisory Line can proudly claim to save their customers 50% in debts on average. Although this is by no means guaranteed, there is indeed a very good chance that, by speaking to your creditors on your behalf, the debt management company is able to convince them that it is in their interest to bring down the sum originally agreed to.