Most people have had debt that got out of hand at some point in their lives. Before hiring a company that specialises in helping people get their finances in order, you should try a few self-debt-reduction methods to see if you can make things better on your own.
Avoid having your accounts given to companies that collect debts.
If you don't pay your bills, "debt collection agencies" will take over your loans, credit cards, and other debts. This will hurt your credit score a lot, and if you have a low credit score, it will be hard, if not impossible, for you to get loans in the future. If you have a low credit score and still want loans or credit cards, you'll have to pay much more in interest. This means that it will take you longer to pay off your debt and cost you more in the long run.
You should do everything you can to keep your creditors from giving your accounts to debt collectors. Most of the time, the creditor won't send your account to a collection agency as long as you send money each month, even if you don't send the full amount each month. If you need to send less than the full amount due for a while, talk to your creditors about what you can do.
Talking with your creditors
When people sign up for credit counselling services and debt consolidation programmes, the agencies actually contact each of your creditors on your behalf to try to negotiate better payment plans and lower interest rates. You have no reason not to try to do this yourself.
First, make a list of everyone who owes you money. Include their names, phone numbers, the amount you owe, the minimum payments, and the interest rates. Find out how much money you can send each creditor each month and then call each of them.
Explain that you're having trouble paying your bills because your finances are bad, but you still want to keep your end of the deal by paying them on time. Most of your creditors, especially credit card companies, will work with you to make a payment plan. To make your payments more affordable, they might lower either your interest rate or your monthly payment, or both. Don't be afraid to tell them how many creditors you have and how much money you want to send them each month. They may be able to work with your preferred payment plan, at least for a while.
You could also try to negotiate a payoff amount that is a few hundred dollars less than what your current balance is. Most of the time, you need to have the money to pay off the account right away in order to negotiate this way.
Don't believe what they say.
Make sure that when you make a payment plan with a creditor, you always get a letter that spells out the terms of the deal and what will happen if you don't pay as agreed. If you don't get the results of your negotiations in writing, you could end up paying late fees or higher interest rates if you send less than the minimum amount due on your accounts. You never know if the person you're talking to will follow through and update your account to reflect the agreed-upon payment schedule. You'll have more power if the company gives you something in writing, and you'll be able to fix problems like late payments or higher interest rates.
