Living under crushing debt can be extremely stressful. According to USCourts.gov, over 800,000 people filed for bankruptcy in the US in 2015. However, bankruptcy can have a disastrous affect on a person’s financial health and assets. To avoid bankruptcy, you should consider debt management services. Below are six major benefits.
1. It Can Reduce Your Monthly Payments
One reason consumers seek debt management services is because they can’t handle the amount of money creditors ask from them each month. A debt management service will negotiate with creditors to bring your payments down. In certain cases, the amount that has to be paid each month is slashed by as much as 30 to 50 percent.
2. It Can Lower Your Number of Bills to One
Another issue that many people have trouble with is managing so many bills at once. It can be easy to miss payments or get behind just due to being overwhelmed. When you work with a debt management service, however, you can set it up so you make a single payment directly to that company. This is called credit consolidation.
3. It Can Remove Penalties and Fees
When you work with a debt management service, you will usually be assigned a credit counselor that will act on your behalf and negotiate with your creditors. This can be advantageous in regards to altering the terms of your contracts with those creditors. Things like fees and penalties you had to pay before could possibly be waived.
4. It Can Raise Your Credit Score
In certain cases, working with a debt management service can help you repair your credit. For one, when you work with a debt management service, your credit score will not be affected until you finish the program. Second, working with a debt management service will allow you to lower your total amount of debt and develop a more positive credit history. This can be reflected in a higher credit score.
5. It Can Allow You to Avoid Bankruptcy
One of the greatest benefits of debt management is that it can allow a person to avoid declaring bankruptcy. According to Bankrate, a bankruptcy will stay on your credit history for a decade. If you want to buy a home or get a good deal on a car loan in the next ten years, you should avoid bankruptcy at all costs.
6. Interest Can Be Frozen
One of the things that can become very frustrating with a lot of debt is the fact that you are often paying off interest instead of paying down the balance. When a credit counselor negotiates with your creditors, one of the things that could be agreed to is freezing the interest on your debt.