When faced with an enormous need for funds for activities like mortgaging a house, sponsoring children's education, or handling unforeseen legal troubles, people usually apply for loans from financial institutions and borrow them against collateral. Paying through your credit cards for medicines, utility bills, or other expenses or taking personal and student loans are some other examples of credit. The difference is you are not required to collateralize or pay a security deposit in the latter case. While all of the above situations lead to debt creation, the ones without collateral require users to employ suitable debt management services.
What is a Debt Management Service?
Are you unable to pay monthly dues to creditors on time? If yes, an ever-increasing pile of debt can be overwhelming. Signing up with a debt management service is a secure way to get relief from the hassles of handling debt repayment all by yourself.
A debt management service agency primarily deals with unsecured debts, i.e., debts not backed by assets or collateral. A debt settlement is usually required when the accrued amount is $10,000 or more. (1)
A debt management agency draws up a Debt Management Plan to systematically repay your debt once you enlist its services.
What is a Debt Management Plan?
When you collaborate with a company for debt management services, they create a Debt Management Plan. To do so, your counselor will:
- Assess your present financial situation, including income, expenditure, loan amounts, and other requirements.
- Consolidate your obligations under one payable scheme.
- Subsequently, your debt managers will attempt to come to an understanding with your creditors and seek a waiver or reduction in interest rates and assist you in obtaining such benefits.
- Once both parties are on the same page, the debt manager will draw up a budget, which implies that you will pay a monthly sum to the counseling agency, which will distribute the funds among your creditors.
- Regular and prompt payments allow the company to further negotiate the terms and conditions with creditors.
Although several companies across the US provide debt relief programs, specific parameters must be considered when selecting your debt counselor.
How to choose a Debt Management Service?
Every single debt management service aims to help borrowers. However, when you need an external agency to deal with your finances, primarily your debts, they should be trustworthy, reliable, and enjoy impeccable credibility.
While looking for an appropriate organization, complying with these criteria is necessary:
- Type of Debt: You must consider the nature of the debt to determine whether you require a debt management service. In the case of secured debts, like mortgages, there are alternative options.
- Accredited by a reputable Organization: While selecting a worthy debt management service, it must be certified by the National Foundation of Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA).
- Fees charged: Considering the upfront cost of hiring the services of an organization is a prerequisite. According to Forbes Advisor, fees play a key role, up to almost 20%, in ascertaining a company's trustworthiness. A debt management service with maximum transparency regarding their charges is preferred.
- Customer review: While choosing the appropriate agency, you must review the customer reviews on the company websites and other review agencies. Client stories will give you an insight into the number of satisfied customers, thereby helping you make a decision.
- Long History of Activities: You can gauge the legitimacy and creditworthiness of a counseling agency based on the years they have spent in the business. A longer and more successful track record will be paramount in selecting a debt management service team. (3)
Choosing a nonprofit organization to handle your debt is advisable as they offer several sources of learning and introduce you to various options that can help you become debt-free.
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Now that you know the factors to pay attention to while choosing a company, read about the best debt management services in the United States. They are authentic and will ensure your debt settlements are smooth.
Which are the 10 Best Debt Management Services in the US?
Debt management is integral to providing financial solutions to those in need. As discussed above, verifying the organization's genuineness is crucial to avoid getting defrauded.
1. New Era Debt Solutions
Established in 1999, New Era Debt Solutions is an all-rounder and a name to reckon with in the debt settlement industry. With an A rating on Better Business Bureau (BBB) and a host of satisfied customer reviews, it will instantly instill confidence in you about your debt being managed well. One of the main positives is that there are no upfront debt consultation and analysis charges. Those individuals who require support for their credit card bills, medical bills, student loans,and payday loans have the perfect partner in New Era Debt Solutions.
The debt management service fees range from 14%-23%, charged on the original debt amount. It's marginally lower than other agencies. However, its presence across states in the US is limited. It also does not yet have an app, which proves to be a disadvantage. (4)
2. American Consumer Credit Counseling (ACCC)
Founded in 1991, with a long track record, the ACCC is NFCC accredited. Rated A by BBB, the service provider is present in all 50 states and Washington, D.C., and deals with unsecured debts due to credit card bills, medical bills, signature loans, and collection accounts. The company provides counseling on debt consolidation, management, and related services. The ACCC promises to reduce the interest rates substantially by 30%-50% and endeavors to make you debt-free in under five years. (5), (3).
Although applauded for their excellent customer service, creditors often disagree with the negotiations and deals the company offers. Debt management services might not work if you're irregular with your monthly payments. (6)
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3. Money Management International (MMI)
MMI is one of the oldest organizations in the industry, as its history goes back to 1958. The MMI, as a debt management service, existed in 1997. Since then, it has been one of the most sought-after agencies. MMI provides special services for dealing with bankruptcy, student loans and credit cards. MMI is preferable with low charges (an average of $33 as setup fees and $25 monthly) and fee waiver or reduction schemes. (2)
Throughout America's 50 states, MMI ensures that its clients gain financial stability and freedom. However, you may not be able to use any of your credit cards as long as you're associated with MMI, leading to a drop in credit scores.
4. National Debt Relief
In operations since 2009, National Debt Relief believes that if you're in debt, debt settlement is the correct option. Approach this debt management service provider for finding solutions to business debts, personal loans, and specific student loans. The company promises to help you deal with your financial worries in less than two years.
The highlight of this service is that if the company cannot settle your debt, it might waive your fee, which ranges between 15%-25% of the debt amount at the time of enrollments. (1)
National Debt Relief benefits those over $10,000 and is not preferred for those with a lower debt value. (4)
5. Freedom Debt Relief
This company has provided debt management services for more than 15 years and has an accreditation from FCAA. Freedom Debt Relief truly offers customers financial freedom and relief from creditor calls.
The organizations provide debt solutions in case of private student loans, medical bills, and divorce. The company makes every effort to get you a reduction by presenting the relevant reasons, including unemployment, sudden expenses, and emergencies, to the right authorities. (7), (8)
The client dashboard allows you to keep a check on your financial situation. Although the monthly payments might be low, enrolling in the organization is chargeable. A drawback of this service is that creditors have the option to agree to the negotiations or refuse them altogether.
This company specializes in providing debt management services across areas like tax debts, payday loans, private student loans, and other unsecured debts. CuraDebt has been serving its customers for over two decades.
The USP of the debt settlement program is how it leverages the terms and conditions set forth by creditors to benefit clients. The executives put their best foot forward to help their clients get debt reductions and cash settlements.
Associated with the FCAA and being a reputable organization, CuraDebt does not have online dashboard facilities for clients to track progress. Although they maintain transparency and do not charge upfront costs, you must pay around 20% of the total debt as fees, making the debt settlement program a bit expensive. (9)
7. Pacific Debt Relief
In its latest report, CNBC has ranked Pacific Debt Relief as a debt management service with high customer satisfaction. Per its debt relief program, you will qualify if you have unsecured debts (business debts, collections, repossessions, medical bills, and student loans) higher than $10,000 and reside in one of the 25 states they operate from. (10)
Certified by the International Association of Professional Debt Arbitrators (IAPDA), Pacific Debt Relief works tirelessly to help you attain your financial aspirations and live a debt-free life. A minor flip side is that, per their rules, individuals with smaller debt values can't avail of their services.
Another credible debt management service provider, Credit.org, is well-known in all 50 states of America and Washington D.C. for providing innumerable online courses, tools, and seminars to improve financial literacy. Credit.org does not disclose its rates. The charges vary depending on the state of residence.
You might have to close all your credit cards if you associate with them. On the other hand, with expert negotiations, Credit.org might help you get waivers and reductions, which might help improve your credit scores. (2)
9. Accredited Debt Relief
For-profit debt management service, Accredited Debt Relief is unlike other nonprofit companies, which means that the organization works as a business looking out for profits from the services they offer.
One of the highlights is that levying of charges depends on settling the debt. Thus, the debt management service offers a money-back guarantee. (2) With an A rating at BBB, Accredited Debt Relief provides one of the fastest debt settlements, usually between 12-24 months. (1)
Available in only 30 states, this company provides services to those with $10,000 or more interest debts on credit cards, medical bills, and private student loans. You must pay 15%-25% of your enrolled debt, making their plans high-priced. (1)
10. Green Path Financial Wellness
The debt management services of Green Path Financial Wellness assure you of a debt settlement between three and five years. The key highlight of the organization is that it provides in-person meetings, which several people prefer over telephonic or online discussions. The organization offers free counseling, which includes sessions for students as well. Green Path Financial Wellness charges up to $50 as setup costs and up to $75 as monthly charges, often considered high. (1)
The key takeaway is that debt management service is an apt way to clear your outstanding amount. The debt managers make every possible effort to ensure you get some reductions to ease your burden. Each company has its method of calculating debt and arriving at a comprehensive figure.
Bright Money is a platform that provides various customized plans to help you be debt-free.
Q1: Can bankruptcy be an option?
If the debts are too large and unpayable, bankruptcy is a feasible option to clear the debt.
Q2: What are the side effects of filing for bankruptcy?
The side effects are that your credit scores take a hit, and obtaining a loan in the future becomes rather difficult.
Q3: Does a debt management plan affect your credit score?
No. Enrolling in a debt management service does not affect your credit score.
Q4: Which organization should I choose: for-profit or nonprofit?
A nonprofit organization is undoubtedly a better option as they educate you regarding your finances and have the best accreditations.
Q5: How to prevent bad debt?
The primary way to prevent bad debt is to ensure you have a streamlined payment system, maybe monthly, quarterly, or annually, depending on the nature of the payment to be made.