You don’t have to be told what it is like to accumulate debt and have the debt collectors on your back. Most people try to dodge the debt collectors. However, this is not a good solution. A better idea is to seek the help of debt counseling services, and bring some sanity to your financial affairs.
These services negotiate with your creditors, get discounts, obtain late-fee waivers etc. They also consolidate all your debt into a single unit, so that you make one payment a month instead of several. Also, this payment is made to the debt reduction company which then pays the creditors.
The debt counseling company also takes the debt collectors off your back. You no longer get threatening calls or nasty mail. The only disadvantage is that the moment you take the services of such a company you loose several credit points. The creditors realize that it is not absolutely safe to lend money to you.
However, this is preferable to having a record of continual late or missed payments. In fact with time, most creditors are willing to overlook the renegotiated interest rates in your records since it shows that you are honest, and keen to clear all your debts. This is what the creditors want. They don’t want you to declare bankruptcy.
The debt counseling company basically acts as a middleman, taking a percentage of your monthly payment and possibly the benefit of additional rebate from your creditor. It is usual for these firms to charge anything up to 10% of your monthly payment as their fee. Sometimes, they get you to pay larger monthly installments and then get some kickback from your creditors for giving them a larger EMI! You should therefore make sure that you sign up with a firm that has a reputation for keeping your interests in mind.
You also need to know what happens if you miss an installment. This is only sensible because this habit of missing is what gets you to their doors in the first place. Also, choose an accredited firm through the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. They will be more ethical and honest in their workings.
You also need to bring some financial discipline in your life. Otherwise, the efforts of the debt reduction company will go waste, because you will soon accumulate another debt.