What are the benefits of hiring a debt collection agency or an agency that does all kinds of legal recoveries and collections? There are two answers to that question. One is that a debt management company is a service and the other is that a debt agency is an entity. In other words, there are both benefits and disadvantages to using these services. We’ll look at them here.
The first question is as to why there are any benefits at all to using these financial distress management companies or you can say debt collectors. The answer to this question is that all of the disadvantages and problems that may be present with your current financial situation have a future impact on your present value. This present value is the value that you would likely receive in the event that you were to get out of debt.
For example, consider a debt that is unsecured. This means that there is no collateral to rely upon in the event that you do not pay off the debt. The amount of equity that you have available will typically diminish over time as you continue to miss payments. However, if you obtain equity loans, or equity lines of credit, you can potentially enjoy a present value of three times your debt balance, or about fifty thousand dollars, depending on the equity in your home and interest rates that you can qualify for. This means that you would stand to benefit the most from using an agency to help you eliminate your debt.
However, if the economy were to turn around and the housing market were to suffer a collapse, then your equity would go down drastically. In addition, if the government decided to backstop some mortgage lenders so that they were protected from a crippling mortgage crisis, then you would likely lose your ability to purchase a home because your debt obligation would exceed the value of your equity. All of these factors are beyond the control of the average consumer, and a debt management company is able to provide you with the protection that you need to minimize your risk and maximize your benefit. This is exactly what an exit management plan does.
An exit management plan is a debt solution that leverages your equity in order to provide you with both short term and long-term benefits. For example, instead of just paying off the debt that you currently have, the exit management plan will negotiate with your creditors to get lower interest rates, balloon payments, or even reduce the principal balances.