When you're in trouble meeting your debt payments along with daily expenses, debt management help is what you may need. With debt management advice and help, you can get rid of excess dues by paying them off through an affordable plan. If you are curious to know what debt management is all about, then go through the topics given below:
A debt management plan or program (DMP) is offered by a credit counseling agency or an online debt management company when you need more than simple budgeting to help you pay off bills. The company offers debt management counseling and negotiates with your creditors or collection agency (CA) in order to help you get lower rates on your bills. This reduces your monthly payments such that you can pay your bills on time.
Let us understand how a debt management plan works through the following example:
Sally has 1 Credit Card, 1 Personal loan and a Medical bill.
The interest rate on the credit card - 15%
The interest rate on the personal loan - 20%
The interest rate on the medical bill - 25%
So, the average interest rate is = (15% + 25% + 20%)/3 = 20%
The outstanding balance on credit card - $15,000
The amount owed on personal loan - $13,000
The amount owed on medical bill - $12,000
So, the total debt amount is
= $15,000 + $12,000 + $13,000 = $40,000
Unable to repay debts on her own, Sally enters into the debt management plan.
Sally combines the debts into a single monthly payment at interest rate of 15%.
The overall interest rate is reduced by - (20% - 15%) = 5%
At the end of the year, Sally saves = (5%)*40000 = $2000 each month.^Top
Unsecured debts like medical bills, credit card bills, student loans, payday loans etc, are included in an online debt management plan. However, payday loans and student loans may not be covered by certain plans.^Top
You should go for a debt management program or plan if you're in any of the situations as given below.
An online debt management plan or DMP can help you in the following ways:
To find out the right debt management help company, you need to check the following:
Check out the steps in a debt management plan.
There are 7 tips you need to follow when you manage debts with a debt management plan or program.
1. Accept a plan only if you can afford it: If an online debt management company proposes a repayment plan which you can't afford to follow, it is better to not deal with it.
2. Get everything in writing: Do not go for the services of a company offering verbal agreement. Get the terms and conditions in writing. Verify the monthly fees and duration of the program before you sign the agreement.
3. Get the DMP approved by creditors: Once you go for debt management counseling, make sure the proposed plan is approved by your creditors.
4. Make regular payments: When you enroll in a DMP offered by online debt management services, try to pay at regular intervals. Don't stop paying while you're on the plan.
5. Make sure the fees aren't high: There are online debt management companies which charge separate fees for application, enrollment and consultation. Find out what fees are charged by the company. Make sure you're not paying high fees.
6. Keep track of your payments: Make sure the company doesn't send late payments to your creditors. Just keep track of how the payments are disbursed.
7. Protect your personal information: Make it a point to get a written privacy policy from the online debt management company. When you seek debt management advice and help, you have to provide some personal information as well. Make sure that your personal information is not revealed to others.^Top
When you're in a DMP, your credit report shows that you're making payments through a debt management help company or credit counseling agency. However, FICO or Fair Isaac Corporation will not consider credit counseling or DMP while calculating your credit score. For more information on this, check out the debt management faq section.
With debt management advice and help, you can recover from debt problems and get on with your life. All you need to do is stick to a tight budget and keep making regular payments till you're debt free.^Top
A non profit debt management program helps you repay your outstanding balances at low cost. The companies offering non profit debt management program charge a nominal fee for their services. So, it becomes easier for the cash-strapped consumers to work with the companies offering non profit debt management programs.
These non profit debt management companies function just like the for-profit management firms. The only difference is that the non profit companies usually don't pay taxes to the IRS and they receive financial help from the creditors wanting to get back their money.
Benefits of non profit debt management programHere are the key benefits of a non profit debt management program:
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