Debt repayment assistance programs can be available through either a debt management plan or debt settlement for consumers who are struggling to repay certain debt obligations in their lives and depending on a consumer’s situation, these plans will benefit individuals in different ways, but they are not necessarily always the best choice for each situation a consumer may face. Financial counselors who have seen more struggling consumers over the past months due to continued issues related to either their home loan, their job, or simple financial difficulties related to excessive spending have all attempted to outline not only what these debt repayment programs entail, but when a consumer should seek out one plan or another.
Obviously, the first steps that consumers need to take when they are having trouble paying their debts is to simply review their finances, make a budget, and attempt to eliminate wasteful spending from their lives so that they can more easily meet payment obligations on their personal debts. However, some can turn to nonprofit credit counseling for this type of assistance if they find that cutting costs in their finances is something that they have either attempted in the past or are simply unsuccessful at in the present, when it comes to helping them avoid distress related to paying off what they owe. In severe situations, like when unemployment may be an issue, speaking with a reputable credit counselor could be more helpful as they may find areas where consumers can save despite having income problems, but again, some situations lead to a necessity for either management or settlement.
Yet, understanding the differences between these two options is incredibly important as debt management can be less severe and detrimental to a consumer’s credit score than debt settlement in a management plan, which is usually implemented by a counseling agency or can be offered by another organization. Debt managment offers a consumer the option to pay less money towards their debts each month, but they will eventually meet the entire cost of their original debt obligation. This agreement, which sometimes can simply be worked out between a consumer and creditor, may also be worked out through a counseling organization that will set up a plan in which consumers will pay money to the counselor and, as a result of agreements established between creditors and this particular agency, payments will then be made out to various creditors within the confines of this debt management plan.
Debt settlement, on the other hand, is usually more detrimental to a consumer’s credit score due to the fact that it will allow consumers to get out of debt, but at a cost that is less than the original amount they owed to their creditors. While there are some organizations who also asked that consumers stop making payments to their creditors, this may be one reason that consumers should be cautious when dealing with certain debt settlement companies, as missing payments to various creditors will obviously do damage to a consumer’s score, on top of the fact that a consumer will not be paying their debts in full.
Many problems that arise during debt management or debt settlement usually stem from either late payments or missed payments on the part of a consumer or the organization implementing one of these programs, so consumers need to heavily research not only credit counseling agencies and debt management and settlement services that they offer, but also consumers need to get an upfront outline of exactly how one of these reputable agencies will either implement a debt management or debt settlement plan on their behalf. While, again, these forms of debt relief can cause problems in the lives of consumers, especially when missed payments are advised, but working with reputable organizations and addressing financial difficulties early may help consumers avoid the need for a debt management or debt settlement plan altogether, as solutions from simple credit counseling and household budgeting may be enough to help consumers escape their debt difficulties.