Finding a Good Debt Management Services Agency

A Credit Article Contributed by Mark Mcclelland

Be Sure You Like the Organization Providing Your Debt Management Services

Debt management services typically prey on those of us who've managed to accumulate a bit more debt than we can handle. We feel that we're in over our heads and simply keeping track of whom we've paid and whom we haven't is a job in itself. And to make matters worse, it's not easy to tell the good guys from the bad (and you'd better believe there are a LOT of bad guys out there).

Well, although debt management services aren't a panacea, they can sure help us get our houses in order, even if we still have to pay all the bills. Typically we arrange for debt management services through interaction with a credit counseling organization, like of one the non-profit Consumer Credit Counseling Services, or a reputable for-profit company like Accelerated Debt Consolidation Corporation.

But before you put you John Hancock on the line, be sure that you're comfortable with the services the agency is going to provide, and that they'll act in your financial best interests.

What Services Does a Debt Management Services Organization Provide?

Basically, any organization provides debt management services is going to act as a go-between with your and your creditors. They will work with both you and your creditors to develop a plan allowing for a single monthly payment, made to the agency, to be used to pay off the various debts you owe. Typically the debt management services firm receives a small monthly fee or commission to underwrite their operations, usually a percentage of your monthly payment.

Lots of people, having entered into a debt management services agreement, actually have difficulty sticking with the re-payment program, say due to a sudden financial emergency or you loose your job, so it would be beneficial if you clearly understand, before signing on, what would happen if you're late with or miss a payment, or may not be able to make your full monthly payment.

While debt management services companies might be willing to make payments on all of your debts both secured and unsecured, their services are related to, for the most part, unsecured debts such as credit cards, personal loans, and medical bills.

Understand that debt management itself is different from credit counseling, and may not be the best solution for all those feeling a bit of financial pressure. For example, for those whose debt is primary secured, meaning most of your debt is due to your mortgage and 3 card payments, probably won't find a debt management service to be of much use. These people would probably benefit more from a debt consolidation loan, than employed the services of a debt management company.

How Will Using a Debt Management Services Company Affect Your Credit Report?

If you can get by without having your debt management services company negotiate with your creditors for lower interest rates, or perhaps a reduction in the actual amount of debt owed, you'll be much better off than otherwise. Any negotiations regarding interest rate reductions and debt owed are likely to be reflected on your credit report in some way or another - and not in a positive way either. Many creditors might feel that you represent a higher risk if you've had to negotiate for better rates, and might be lees likely to offer credit in the future.

On the other hand, any effect these negotiations might have on your credit report will pale in significance when compared to the impact of a pattern of missed or late payments, or a filing for bankruptcy protection.