Benefits of Debt Management Over Debt Settlement

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Debt management and debt settlement are popular debt relief solutions and serve as effective alternatives to filing bankruptcy. Enrolling in a debt management plan or a debt settlement program is suitable for those who find themselves in significant, yet less serious, financial hardship. However, each of these debt solutions has its trade-offs.

For example, credit debt settlement is more aggressive and will eliminate your debt faster, but will also negatively impact your credit score.
 

How do you know which debt solution to choose?

1. Consider a debt settlement program when…

   • Your monthly debt payments are totally unaffordable and overwhelming given your current income level.

   Many people find themselves in the situation of only being able to afford to make minimum monthly payments toward their unsecured debt (i.e. credit cards). Unfortunately this approach to get out of debt is extremely costly, and worse, you find yourself making very little headway on paying off the principle balances of those debts. So you may be treading water but land is not on the horizon.

   For those who find themselves in this situation, you need the debt relief offered by debt settlement companies in order to make some significant progress towards paying off those balances.

2. Consider a debt management program when…

   • Your financial situation is not as hopeless sounding.
   • You see a way out of your debts with some moderate assistance.
   • You are paying down your balances, but they are still formidable and you think you might run out of steam before you’ve been able to pay them off completely

   Your credit score will fare much better, as your balances are paid in full through the assistance of lowered interest rates.

   • Because the balances are paid in full, the credit card companies are much happier with this arrangement and will not subject you to the harassment that can accompany credit card debt settlement programs.
   • The fees involved in their programs normally are lower.
   • Because many of the debt management companies are non-profit agencies, they also provide budgeting, education and financial counseling assistance along with their core function of managing and consolidating monthly debt payments.

   Debt management counseling, also known as consumer credit counseling, is a preferable solution, and you can avoid some potential problems of debt settlement services.

Related posts:

1. Pros and Cons of Debt Settlement
2. Will a Debt Settlement Program Damage my Credit Score?
3. Costs of a Debt Settlement Program