Debt Management And Consolidation
Most debt management companies work as debt consolidation counselors. They help individuals who have accumulated a fair amount of unsecured debt and are now unable to make the required monthly payments.
What typically happens to these individuals is that they fall behind on some of their payments, which doubles or triples their minimum payment. Interest charges then accumulate. After falling behind, late charges are added on monthly, thus exponentially increasing the debt. Due to inadequate funds it becomes impossible to catch up. Despair sets in. This is where debt management and consolidation can play an important role in getting your monthly debt payments under control.
Creditors Favor Debt Consolidators
Debt management companies and credit counselors can help individuals by contacting all of their unsecured creditors and notifying them that the client has enrolled into a debt management program. This is the essence of debt consolidation.
Creditors must accept that the client has enrolled in such a program, but need not grant any leniency in the repayment of the debt. Realizing, however, that the individual is financially over-extended and is seeking professional help, most creditors will work with a debt management company and offer some form of relief.
Creditors realize that if they don’t compromise the amount owed with a debtor the result will likely be bankruptcy and the creditor will receive nothing. Through debt consolidation services creditors can at least recover the principal on their loan. In addition, you will notice that most debt consolidation companies are organized as “non-profit” companies. This allows the credit companies to recoup a significant portion of the “lost interest charges” through tax write-offs.