Debt Management - Friend or Foe?

Summary: When it comes to debt relief are the debt management companies really the 'good guys' they appear to be?

When the option of debt management is brought up as a means of debt relief the more 'in the know' will immediately highlight the major flaw of going on such a program. Yes of course getting a management company to negotiate with your creditors, lower your monthly payments and reduce the overall amount you owe will put a few noses out of joint. And in turn the creditors will report that back to the scoring companies who will put negative marks on your credit score. So why do people do it? And more to the point why are there so many debt management companies out there making such good living out of it? Obviously if your debt problems are not verging on declaring bankruptcy and you're not having trouble making payments every month then knowingly harming your credit score just to lower your payments and overall amount isn't the cleverest of moves. But what if you're missing payments every month, juggling who to pay in an attempt to stay afloat and keep the wolf from the door? If you're missing and making late payments regularly then your credit score is taking a hammering anyway and you obviously can't keep up with all the obligations each month. Faced with this unfortunate reality many people will throw in the towel and declare bankruptcy- what happens to their credit score then? Cue the debt management company, champions of the oppressed debt-ridden consumers and nemesis of the attack-dog debt collectors. They'll take on all the communication between you and your creditors, they'll negotiate realistic payments you can afford and will lower the overall amount you end up paying back (largely interest). They enjoy dealing with lenders and negotiating lower payments, they do it all day long, they live and breathe nasty phone calls and red bills, it gets them out of bed in the morning. In this day and age of ever increasing 'credit casualties' who find themselves in between a rock and a hard place there is definitely a need for a service to cater for those who have reached the end of the line and have nowhere else to turn except for the dreaded big B. Faced with debt problems many people's first instinct is to consolidate. When you think about it consolidating is just borrowing the amount you owe plus whatever interest the consolidation loan incurs. Adding to you debt or 'borrowing your way out of debt' is just increasing the amount of your debt and the amount of time you will be in debt. If you are not at rock bottom and looking for a smart way to become debt free quicker then no, debt management is not for you, however it definitely has it's place and many a consumer is sleeping better, worrying less and enjoying a better quality of life right now for it. That's not to say that there aren't abusers of the system to be wary of, just like the rest of the credit and debt industry. You should look for the usual red flags when prospecting any credit or debt related service: How much do they stand to make out of you? How much information will they give you about their program before you join? What are they prepared to do for free? Are they affiliated with any financial institutions or lenders? Like with anything in this field the more educated a consumer you are the better choices you can make for your own unique situation. Debt management is all about immediate relief, and to many it is a welcome relief to become free from harassment and be able to financially breathe again. So is the credit score damage worth it? If it's taking damage from missed and late payments anyway and/or bankruptcy is staring you in the face there's really no other option.