Out of the various types of service provided by the debt settlement companies, budget counseling is one of the primary functions. There are numerous such debt settlement companies that offer such service to people who are struggling to deal with their debt or debts. This is a specialized service that will help you to regain control of your financial situation and help a lot in your debt management program.
The entire process is long and needs a lot of precise calculation. It all starts with an honest and complete compilation of all your incomes and expenditures in a month. However, in this regard, there is, so industry specific method or guide to ensure the best and most accurate compilation. That means it will be impossible to gauge by you the level of professionalism and seriousness in such a process especially when you take help of these for-profit companies.
However, there is no need to distrust the neutrality of these companies instinctively as most reliable and trustworthy companies will work keeping your best of interest in mind. Moreover, these companies derive their profit usually from granting credit and not from such consultancy services. Therefore, there is no need to worry much about the precision and reliability of the budget produced by the company. All that it should reflect is your repayment capacity precisely in the end.
There is no single debt settlement company that will offer budget counseling services predominantly. It will be a one aspect of their varied services in other categories provided to you.
It is crucial
However, the fact that no debt settlement company offers exclusive budget counseling service does not take away the significance of it in your debt free venture. It is, in fact, a crucial aspect of it no matter if this service is offered to you collaterally by the company.
- A proper and authentic budget will help you to find easy ways to cope up with the difficult financial situation you are experiencing now and regain control of your finances.
- The experience of these non-profit or for-profit organizations will help you a lot in this regard providing you with debt payment assistance along with it. They will consider your family economics, your income from various sources and expenses in different areas.
- Apart from this, they will focus on the ways in which your rights are best protected as a consumer and negotiate with companies to reach an affordable and reasonable agreement.
- Especially for the low-income households their focus is also on the developing and monitoring of several debt settlement programs and choose the most suitable one for you according to your repayment capacity.
- They will also ensure that you do not fall behind your bills this time and further harm your credit score.
Therefore, a professional service provider chosen after going through the debt settlement reviews will be impartial while offering budget counseling services so that they strengthen your autonomy and help you in making fruitful decisions about your personal finances. Sharing common values, they will ensure faster and more fruitful debt management.
Help in debt negotiation
Another significant service provided by the debt settlement companies is during the negotiation process. These professional companies will focus primarily on two types of debt settlement negotiation:
- It can be an agreement between you and the creditor in which you will make an immediate payment in the form of a lump sum of the portion of the amount outstanding or
- Rescheduling the payments over a longer period than what is mentioned in the original loan contract.
The type of negotiation opted for eventually will largely depend on your ability to arrange for the lump sum or your to repay as the case may be considering all factors that may influence the final outcome.
Usually, these service providers promise a debt reduction anywhere from 30% to more than 80% and put an end to the creditor’s demands successfully and permanently. This will eventually help you to attain financial freedom. The usual period in which you can achieve this ranges from three to five years depending on the policy of the company and the debt settlement plan you choose finally.
Billing for their services
The billing model for the services of the debt settlement companies will vary depending on the type of service offered and the model preferred by the company. It will also depend on the regulations that may be in effect in the state serviced by the specific company.
The different billing models followed by these companies are:
- Contingency fee model is a rarely found billing model in the market but if you are lucky you may still find a few companies that follow such model to bill their services. According to the model, the company will charge you a percentage of the total amount forgiven by the creditor to settle your debt. This amount is collected by the company only when your debt is settled with your creditor or creditors. There are a few specific American regulations that authorize only this type of billing model followed by the debt settlement companies.
- Few companies may even charge a percentage of the total debt that is recorded in the debt settlement plan. This is, however, the most common billing model followed and the percentage charged can be as high as 30% of your total debt and 25% on the lower side, depending on the business policy of the company you choose.
- There may be a few other companies that will break up their fees into two specific categories namely administrative and maintenance fees depending on your initial debt amount. However, when you calculate the final amount charged it would come to the same 25 to 30 percent range.
The process for collecting these fees are also different as a few companies may follow the ‘Front-loaded fees’ process. In this process, negotiations will start only when a considerable amount is accumulated in the account of the company over a specific time period unless the creditors take legal recourse or obtain an acknowledgment of debt.
Author Bio
Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.
