Vision Credit Education, Inc.

If you are in debt and trying to find a way out, you may notice that there are hundreds of different companies and nonprofit organizations that promote debt settlement or debt management. The choices can be confusing. How do you know if you are making a good decision?

Examine your Situation

Having 1 or 2 old debts that you haven’t paid on in at least a year or more might make debt settlement more attractive. So what exactly is debt settlement?

Debt settlement is the act of negotiating a lower, lump sum payoff with a creditor. It is useful for reducing what you owe while closing old accounts.

It is not useful for dealing with several accounts in which you do not have money saved to make large payments. Payment plans are not available with debt settlement, and debt settlement companies that offer such “payment plans” do little more than take what little money you have each month and leave you vulnerable to judgments. Some debt settlement companies have revealed to regulators that their success rates are as low as 2%.

Even if you successfully settle a debt, it will still show up as a black eye on your credit. Your credit report will reflect that you settled for less than the full amount owed, that is, unless you can also negotiate a pay for deletion agreement!

How is Debt Management Different?

Debt management is an actual program in which creditors may offer benefits to enrollees in order to reduce the risk of default. Debt management programs may be able to provide you with a lower monthly payment while still paying your debts off faster.

They do this through lower interest rates on your existing credit card accounts. Participating lenders will, at their discretion agree to lower your interest rates for as long as you stay active on the program. Even though you may be paying less each month, a greater portion of your payments is still applied toward principal rather than finance charges, which helps you eliminate your debts sooner.

Finding Help

If you need help, then consider meeting with a nonprofit credit counseling organization. A for-profit debt management company may provide a good debt management program, but they usually fall short on counseling. In fact, their job is to sell you on enrolling, whether you need such a plan or not.

A nonprofit credit counseling organization can help you evaluate your situation, determine your needs and offer suggestions about options for improvement. If you need to enroll in a debt management program, they can help. Similarly, you might just find that a fresh approach can help you repay your debts on your own.

If Vision Credit Education serves your location, feel free to contact us for a free counseling session. If not, you can still find an agency near you affiliated with the NFCC.