When you are unable to make the full payments due on your credit cards on time, you’ll start to get phone calls from your creditors. This is often a no-win situation. If you ignore the calls they just keep on calling, but if you answer them,they ask for payments that you have no way of making. Occasionally, you can make progress by talking to them. Sometimes they will offer you an option to negotiate your credit card debt by lowering payments and interest rate. Often they will only do this for short periods of time, and it’s not enough to help you.
If you are unable to negotiate a repayment schedule that makes sense in terms of your budget, then you may want to explore a debt reduction program. A debt reduction program can be a great alternative for people who would otherwise be forced to file bankruptcy. Occasionally, one of your creditors may send you to an outside company that manages debt reduction programs for their customers, but often, you must find your own.
With most debt reduction services, you make one monthly payment to a company who negotiates your debts with your creditors, and consolidates your payments into one monthly bill. They take this payment and split off a fee for their efforts, then they split up the rest of your payment between all of your creditors, according to the schedule that they worked out with them.
Debt reduction services are sometimes organized as for profit companies, and sometimes as non profit organizations. The thing to look at is not whether they are for profit or non profit, but what kind of track record to have.
Some companies take only a small fee for themselves, whereas others take a much larger piece of the pie. Some of these companies will wait a few months until you’ve made two or three payments to them, before they start dispersing money to creditors. This is a situation that you want to avoid, as it can do further damage to your credit.
You also need to be careful of debt consolidation companies that ask for a lump payment up front. Before you agree to this type of arrangement, you want to make sure that you are dealing with a company that has been around a long time, and has a great track record. This type of lump sum payment is sometimes needed to settle with a creditor for a fraction of what is owed. If you do pay any fee to a debt reduction service in advance, you want to make sure that there is a strong guarantee that your money will be refunded in the event that they are unable to negotiate suitable reductions in the amount owed, or in the monthly payments.
It is easy to be passive in handling your debts, and sometimes you feel that things are out of your control, and that there is nothing you can do about them. However, by getting started with a good debt reduction service, you can take the first step back towards being in sound financial shape.