Debt Consolidation Services Agreement
The debt management agreement ... the questions you need to
ask.
Debt
consolidation agencies will provide a Debt Management Agreement prior to negotiating
with your creditors.
You need to carefully review the DMA. This is very
important because you may have little recourse later if a dispute arises. Here
are some questions to consider prior to signing the Debt Management Agreement:
Is there a fee to enter the debt management program?
- how much is it
- is it paid separately or part of the monthly debt payment
- when is it due
- how is it calculated
Most reputable agencies charge a signup fee of less than $40;
due on signing or with your first month's payment. Monthly fees are usually
calculated based on either the number of accounts you have under the DMA,
or as a percentage of total debt in the DMA, in either event the monthly
fee should be a very small portion of the monthly payment you make to CCCS.
What are the legal consequences if you can't maintain payments under the contract,
or terminate the agreement?
- will CCCS sue you?
- will the creditors still work with you outside of the debt consolidation
program?
Reputable agencies merely terminate the agreement. You lose the
benefit of having one monthly payment, reduced interest and service fees,
and having the Agency deal with creditors on your behalf. Plus, if you fail
to maintain the pre-negotiation minimum monthly payments to the creditors,
you will be subject to collection actions as well. Creditors may work with
you, but the credibility you had within the DMA is lost and you may find
it hard to obtain good terms for debt repayment.
What are the debt repayment terms?
- monthly amount
- final payment date
Your monthly payment amount should be approximately 30% to 50%
less than what you were paying on the same debts before you entered into
the DMA. The final payment is usually based on a five year repayment plan.
Considering that the minimum monthly payments, before the DMA, could have
taken you 10, 20 or 30 years to repay, this is a very short term repayment.
Do you have to cut up all your credit cards?
No, you don't have to cut up your credit cards, but you may not
be able to use them. Creditors will be unlikely to extend further credit
until they are sure you are maintaining your part of the DMA, and are able
to manage your credit successfully.
What other services do they offer?
Money management counseling, budgeting help, and financial counseling
are commonly offered by Credit Counseling Agencies who adhere to the standards
of AICCCA.
What fees are charged for other services?
Nominal fees are charged for extra services that take into consideration
the amount you can afford, and the recommendations of your financial counselor.
Do Counseling & Consolidation Services Meet Expectations?
It's a win-win situation for you and your creditors when you successfully complete
a debt consolidation program and fulfill your Debt Management Agreement. The
creditor receives payment and you learn to manage your budget, credit and debt
resources.
We highly recommend reputable
Service or Consumer Credit Counseling Services
because
they don't just work to help you get out of debt, they teach you sound money
management that helps you protect your financial future.
If you are absolutely overwhelmed with credit card debt, then you need to check
out
debt consolidation/settlement.
For
a free consultation, click here.
What If They Can't Help Me?
If your debt payments cannot be reduced enough to get you out of debt within
the time and budget guidelines your consolidation service negotiates, you will
be notified. They may suggest alternatives that include revising budget estimates
and monthly payments. If these won't work for you, it's time to
check
out personal bankruptcy.
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Debt Consolidation Services
Agreement
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Debt consolidation & the debt management
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