With the growing number of individuals suffering from debt related problems the United Kingdom is flooded with debt management companies. The process of luring a debtor into agreeing to the company’s terms starts psychologically. They can induce fear and intimidate you; mislead you and eventually make matters worse for you. You must not fall into a trap:
- Heard about cowboy debt advisors? These firms spend a lot in advertising unbelievable offers to clear your debts. Their charges are high but in all probability they will offer you no relief. Any advice that sounds like a miraculous escape from debts may actually be another trap. Avoid such debt management companies.
- It is important to check for accreditations and have all your questions answered in writing. A lot of debt management firms deceive debtors by having their firms named much alike a reputed and trusted debt management company. The Office of Fair Trading (OFT) recently wrote to eleven debt management companies with ‘look alike’ websites warning them to close them or face legal consequences.
- Should you choose a debt management company that does not have proper accreditations, an event may rise where the firm is closed down and your debt management programme is sold or transferred to another firm. The new company may renew your terms and chances are that you might not like it. There will be little that you could do considering the amount of money you would have had already invested to pay off your debt. Worse still, you may find yourself in legal soup if your service provider was not an honest business organization. Avoid debt management firms, companies and organizations without proper accreditations.
- Avoiding creditors is not the solution. If you avoid or fail to make payments to your credit card company chances are that your account will be sold out to a collection agency. Collection agencies are more aggressive and are bad news for debtors. Speak with your creditors and explain your constraints. Once they are convinced that you are doing your best to repay them, they may enter into an agreement and waive off a portion of your debt or freeze interests or make other affordable repayment arrangements. You can avoid the court or formal recovery action if you keep communicating with your creditors. Return their calls if you miss them. Avoid severing communication with your creditors.
- Watch out for debt management firms that promise to reduce your monthly payments to half the amount or close. It’s not always a false commitment. Here is how it works and how it ruins you simultaneously. If your monthly payments are reduced to half then this reduction has to be reported to your creditor or your set of creditors as reduction in the monthly obligation due to hardship. Consequently, this will be forwarded to the credit bureau which will ruin your credit rating. Be careful before signing up with debt management companies that promise an unbelievable reduction in your monthly payments.
- Credit repair firms can’t erase bad debt. There is no company that can clear a bad credit report for you. Companies that claim that they can do that are making false claims. Credit repair companies can only advise you to take actions that will improve your credit rating. They can also dispute any inaccurate information or analysis in your credit report. Credit repair companies are liable to charge you a fee for these services. Actual information can not be removed from your credit report. Avoid firms that claim to erase bad debt or bad credit history.
We hope that this information will help you. If you have suggestions or concerns regarding debt management companies, please write a comment here.
