If you are looking for ways to cope with the painful situation of overwhelming debts, debt consolidation may be an ideal option for your business to get out of it. Credit counseling agencies and debt management plans may offer some relief, but they may also be detrimental if done through a substandard organization.
For those who are not confident about effective debt management, here we will discuss a few essentials that people in business should know.
The latest things to know for effective debt management
- It is primarily a third-party system
If you are tired of handling multiple loans repayments, a debt management plan may work in your favor to make a single payment to only one agency, which will further distribute the payment to various creditors you owe.
However, these companies do not lend money or settle debts. On the other hand, they get into agreements with the major financial institutions, which offer lower fees and interest rates. Through this approach, most of your payment directly goes to settling the balances.
- Agencies vary in quality and repute
Always be careful while planning for something as crucial as your business finances. You can first look for nonprofit organizations that offer credit counseling. It is also ideal to check whether they have accreditation of the agencies like:
These agencies ensure that their member organizations meet high standards through a rigorous set of screening presented by Council on Accreditation. The counselors also have to pass an intensive training and certification. Even while considering the accredited organizations, by picky. Check if the agency is well organized, have an excellent administrative system, and can send payments on time. They should also be capable of offering adequate consumer support and education.
- There may be various plans, but all are same at the root level
No financial institution offers any preferential treatment to business enterprises, even if they are tagged as nonprofit. So, while the agencies and their approaches vary, almost all of their plans are set in the same way. Primarily, your counselor may determine how much it will cost to pay off your creditors in the next three to five years’ time. Check if you also have the option to stop the current plan at any time and get out of the debt anytime when you have excess funds in hand.
- Get counseling before consolidation
“Why consolidate if you cannot even pay for the necessary expenses or if you can find better alternatives?”
That is why you are advised when beginning a counseling during which the counselor will address your overall financial situation. If you have enough fund flow after subtracting the expenses, then consolidation may be presented with many other alternatives. Remember a counselor is more knowledgeable and experienced in handling many such cases.
An expert counseling session can be motivating and enlightening for the debt, and it can help to take an accurate and informed decision. Check the debt consolidation reviews to identify the repute of the counselor attending you, and you also have the scope of swapping counselors.
- Consolidation is not everyone’s cup of tea
So, how to know if a consolidation plan will work well in your favor? For this, first check whether all your balances are unsecured debts like credit card payment, personal loans, or other collection accounts. On the other hand, if your liabilities are mostly related to tax debts, old traffic tickets, and unpaid child support loans, consolidation may not help.
Also, you should consider whether you are confident about paying off the loans for many years to come. Next, you need to have enough funds on hand to meet the essential daily expenses and some savings for your debt.
- Consolidation is steady, simple, and more efficient
While you are into a consolidation plan, your payment remains constant. You do not have to be confused about how much you need to pay to each of your creditors on a monthly basis. It will be more or less the same amount every month. It also helps to speed up the repayment process and sets you free from the debts at a faster pace.
There are many people still hesitant about going for a debt management plan even if they are in deep trouble. The first thing such business people should understand is that debt management is not bankruptcy. On the other hand, with an apt debt management plan, you are committed to paying back 100% of your obligations.
Read through the fine print
There is one primary reason why business owners fall into the trouble of unmanageable debts. It is because they do not usually read through all the terms and conditions or white papers related to the loans they avail. If you repeat the same mistake while approaching the third-party agencies for debt management, you will be pulling yourself into deeper troubles.
So, along with ensuring the credibility and repute of the debt consolidation agencies, also make sure that you read through the catalogs to fully understand the terms and conditions associated with it. Each plan may defer based on your needs and financial status, and it is also essential to identify an apt plan while going ahead with debt consolidation plans.
To conclude, consolidation of loans through an ideal debt management plan can surely be a lifeboat to your business, but you must be able to achieve the same desired results. Always plug the numbers you come across into a debt calculator to identify how and when you are going to be entirely debt free. Stick to the accounts that offer you the lowest interest rate and give you more room to plan the repayment at ease.
Author Bio: Isabella Rossellini is a well-known financial analyst and columnist in many leading online financial publications. She also used to publish debt consolidation reviews about various debt service agencies to help the debtors take a better decision in choosing service providers.