An indebted consumer seeking financial relief may employ different methods of reducing the accumulated debt. The best rated and effective method is the credit counseling. This program is offered by the consultants indebted households employ who mainly advice the consumer of various ways of reducing the debt. This in turn helps the consumer to be more financially stable and credit worthy.
The principal of the credit counseling involves a negotiation between the creditor and the household consumer through a debt consultant. The debt counseling firm works hand in hand with the consumer to calculate the most affordable debt repayment plan. This can come as the much awaited relief to an indebted consumer wishing to regain his or her financial freedom.
The accumulated debts can also result into stress that normally impacts negatively to the health and financial status of the particular consumer. In ordinary circumstances, a consumer accumulates debts from financial services such as acquiring loan, paying land rates or on interests on mortgages among others. In order to come up with a friendlier repayment program, the debt consultants study the consumer debt to find out the best relief. The creditor usually specifies the terms of payment and the guidelines on working with debt repayment program.
When a consumer enters in a debt repayment program, the creditor suspends the account to prevent further accumulation of interests. The debt counselor derives a consolidated account summing up all the accounts of the customer. The new account has a privilege of allowing consumers to pay single monthly installments. The same plan ensures that the new payment is lesser than the total amount a consumer could pay without the plan.
How these programs can results into a lesser payment, one would wonder. But a matter of fact is that most creditors have exceptions those indebted consumers joining debt management plans be pardoned for showing commitment to pay up. Other offers are the reduction of the accumulated debt to a convenient percentage say 50 percent. In so doing the plan provide immediate and reliable financial relief to the consumers.
Another feature of a debt management program apart from financial support is the reduction of interest rates that creditor charge the consumer. A consumer may be paying an inflated 30 percent credit card rates. The joining of the plan will lower the rates to about five to ten percent. In some exceptional cases, some creditors may even scrap off the entire interest rates paid by the consumer.
Another feature of the debt repayment plan is to convert a consumer indebted account to current account. The reward program is used by the banks after a customer shows efforts of repaying the debt by joining a debt repayment program. With a current account, the consumer can now continue repaying the debt through lesser monthly installments.
The debt management program does not necessarily scrap off the debts from credit bureau records. It only gives consumers who prove to be committed to repay the debt an opportunity to do so conveniently. This also creates a good rapport between the customer and a credit company. Most lending institutions do calculate credit score of consumers to determine the most credit worthy clients. The debt management plan in the end eliminates the bad faith between the consumer and the creditor.
Author: Barun KumarThis author has published 3 articles so far.