Watch Video: How debt management helps you manage bills in 11 steps
- 01 Calculate your total debt
- 02 Try for a repayment plan
- 03 Try debt management
- 04 Go for free counseling
- 05 Get enrolled
- 06 Get lower rates
- 07 Obtain an affordable plan
- 08 Get your plan approved
- 09 Make one monthly payment
- 10 Track your payments
- 11 Get out of debt
A debt management plan or program (DMP) is a process through which you can repay your debts at a lower interest rate. With the help of this plan, you can become debt free within 3-5 years.
Yes. Online debt management help is available. However, make sure you read online reviews and check the credentials before you approach a debt management company.
When and Why of Debt management plan
- You earn a decent amount every month
- You can pay a certain amount every month
- You want to repay your outstanding dues in full
- You can repay debts in full if interest rate is reduced
- You can change your lifestyle to follow your budget
- You are facing problems in managing your multiple bills
- You want to improve your credit score
- You can pay professional fees to the debt management company
- You can have positive impact on your credit report
- You can have a stress-free life to enjoy
- You'll get an affordable monthly payment plan
- You can start working on rebuilding your credit
- You can save money when you become debt free
- You'll get fewer calls from creditors regarding payment
- Late fees or over-the-limit fees are waived
- A single monthly payment is required instead of multiple bills
- Pay off debts in a predictable and shorter time frame
What happens in a DMP?
Check out the steps in a debt management plan.
Analysis of your finances:
Negotiation to lower interest rates:
Once you enroll with a debt management services, the company works on your behalf to lower the interest rates and monthly payments to your creditors.
Suitable repayment plan:
The debt management company works out a repayment plan with your creditors so that you can pay back your balances. Managing debt this way in non-confrontational and creates a predictable path to financial freedom.
Single monthly payment:
You'll make a single monthly payment to the company. The company then disburses the payment to your creditors.
DMP - How does it help you get a total money makeover?
You can get a complete money makeover through debt management help. Here's how a debt management company can help you:
- Plan a suitable budget to follow: The counselor will provide you with an appropriate budget following which you can save money.
- Decide upon a monthly payment: The counselor will also decide upon an affordable amount, which you need to pay to the company, every month.
How do you find the right debt management company?
To find out the right debt management help company, you need to check the following:
- Company profile
- Service background
- Client testimonials
can save you
What are the 5 questions you need to ask a company?
If the debt management company you're working with is unable to solve your financial problems, then your credit score will drop, Apart from that, you'll lose money more than any other company doing precisely the similar thing.
So, it is very important to ask the right questions before signing a written agreement with the company.
- How much will you've to pay for a fee?
- How much will you've to pay for the monthly payments?
- Will the counselors be able to cut down the interest rates?
- What will happen if the monthly payment amount is too high for you?
- How'll you know that creditors have received money?
You may have a look at the debt management faq section to know about the other questions.
Steps to choose a debt management program
- Check your credit reports at regular intervals
- Make the payments to the company every month
- Follow the budget planned by the debt counselor
- Notify your counselor if there’s a change in your financial state
- Use credit cards till you repay the debts completely
- Spend more since interest rates on bills are reduced
- Enroll with a company without checking its credentials
- Start making payments before you get a written agreement
What are the tips to a successful DMP?
There are 7 tips you need to follow when you manage debts with a debt management plan or program.
Accept a plan only if you can afford it:
If a debt management company proposes a repayment plan which you can't afford to follow, it is likely your income and expenses are not a good fit for a DMP
Get everything in writing:
Get the terms and conditions in writing. Verify the monthly fees and duration of the program before you sign the agreement.
Get the DMP approved by creditors:
Once you enroll in a debt management plan with a credit counseling agency, make sure the proposed plan is approved by your creditors and that payments are being applied correctly by reviewing the normal monthly statements your creditors will continue to send you while on the plan.
Make regular payments:
When you enroll in a debt management plan make your monthly payment on time. Missing a payment will cause you to lose the benefits of the plan.
Make sure the fees aren't high:
Fees charged by credit counseling organizations for debt management programs are heavily regulated in virtually every state. Fees can range between zero and 50 dollars a month.
Keep track of your payments:
Make sure the company doesn't send late payments to your creditors. Open all of your monthly statements and verify payments are made timely and the payments are being applied correctly.
Protect your personal information:
How much can I save through a credit counseling agency's debt management plan?
Debt management plans doesn't promise a fixed amount that one can save. It totally depends on personal situations. In general, an average client's credit card interest rates were reduced from an average of 24%-10%, saving them approximately $186 in interest every month in the first year of their enrollment. This will give you a free state of mind and you will be able to save again.
Opting for a DMP - You can get financing after it’s completed
While enrolled in the program, it is typically very tough to get financing of virtually any nature in the first 24 months, due to the DMP notation in your credit report, next to each of the accounts enrolled.
Debt Management Programs runs, on average, for about 3-5 years.
You may be able to get financing on a vehicle or even purchase a home, modify an existing home loan, or qualify for a student loan (either your own or parental) after the first 2-3 years of successful participation in your DMP.
When an account in your DMP is fully paid, the DMP notation is removed.
This is a good option, if the math supports your finances (more on the math in a moment).