LEARNING ALL ABOUT THE DEBT MANAGEMENT PLAN

Have you ever been in so much debt that you actually do not know where to begin paying for it?  Perhaps you would need some guidance regarding making payments. Paying is easy as long as you know how to do it properly.  The answer to your queries would be a debt management plan.

How does the debt management plan work exactly?  It is a program that allows management companies to work with creditors on any client’s behalf to reduce the monthly payments and interest rates on a debt.  These people also work to reduce any penalties that you may incur due to late payments.

THE BASICS OF THE DEBT MANAGEMENT PLAN

The plan itself is part of the package that consolidates debt and is basically intended to aid you in regaining financial freedom and control.  This particular plan also helps reduce unsecured debt.

THE MEANING OF AN UNSECURED DEBT

This term refers to a debt that does not have any collateral for support.  Some examples of this type of debt include:

If you have this type of debt, you would have to pay it by cash at a prescribed date.  Otherwise, you could be charged for damages or you may not be able to get the benefits that you came to get from the company that you are indebted to.

UNDERSTANDING HOW IT ALL WORKS

Going back to the debt management plan, it is one of the many ways to reduce monthly payments significantly.  With this particular plan, you will get to save up on interests and any additional fees that you may incur because of the debt.

By enrolling in this type of plan, you will have to pay monthly deposits with any credit counseling organization.  These deposits will then be used to pay off the debts according to an agreed-upon payment schedule. This agreement falls between the credit counselor as well as the creditors.

DETERMINING FACTORS FOR THE DMP MONTHLY PAYMENTS

Monthly payments and interest rates are contingent upon what you can afford as a customer of the counseling organization.  The specific amount to be deposited is determined using various factors as follows:

  • Total Household Income
  • Monthly Expenditures (water bills, electricity, utility bills, groceries, miscellaneous items)
  • Total debt

After the calculations, all the money left will be divided and shared among the creditors equally.

All these pertinent bits of information will be shared with you as the one in debt.  Based on the accumulated data, your payment schedule will be set up by the credit counselor in agreement with your creditors.

VARIOUS ADVANTAGES OF HAVING A DEBT MANAGEMENT PLAN

Here are some of the major benefits of enrolling in a debt management plan:

  1. This particular procedure offers consolidation of credit cards without processing bank loans.
  2. The plan can improve your credit score, in turn, yielding a better credit report.
  3. Creditors and debt collectors will be convinced to stop the calls and visits to your home.
  4. It will help you keep your payments on schedule.
  5. It helps organize the household budget.

SIGNIFICANT CONSIDERATIONS TO MAKE BEFORE ENROLLING IN A DEBT MANAGEMENT PLAN

Before enrolling in a debt management plan, there are important considerations to be made prior to making the final decision.  These are as follows:

  1. Choose the Right Company

You have to select the right company to work with in terms of formulating your debt management plan.  Choose a company that is extremely reputable when it comes to going through the process.

  1. Go Through Financial Counseling

Make sure that you undergo several counseling sessions so that you can be aware of the pros and cons of having a Debt Management Plan.  The credit organization can recommend reliable agencies to help you with financial counseling. You would not have to worry.

  1. Check on the Professional Background of Any Potential Credit Counselor

Do some background checks on potential credit counselors that you are considering to work with.  This way, you can be sure that you will not be spending your last dime on someone who would not know how to do his job.

When doing background checks, it is better to consult with reputable government agencies relating to finance to make sure that there have been no complaints about any credit organization that you could choose to work within the future.

Here are some credit-related organizations and government agencies that you can consult to make an informed decision.

  • Federal Trade Commission
  • The local Consumer Protection Agency
  • Better Business Bureau
  • The Office of the Attorney General

By consulting with these agencies, you will be able to ascertain the reliability of a potential credit organization in constructing your debt management plan.

ADDITIONAL POINTS TO REMEMBER DURING THE DMP ENROLLMENT

  • Full repayment of debts may take up to a maximum of 5 years under the Debt Management Plan.
  • The credit counseling organization reserves the right to limit continuous credit card usage or enrollment while the plan is still active.
  • Late payments may result in loss of payment progress, further increase of the previous debt, additional interests, and cancellation of the payment plan entirely.
  • Depending on your credit score improvement, you may eventually qualify for lower interest rates as well as decreased monthly dues.

IMPORTANT REMINDERS

It is quite important for you to take note of all your debts that will be paid via the DMP and the ones that you will have to be on your own. You must also pay the credit counseling agency and the counselor himself on time each month.

In addition, once you do decide to enroll, you should contact an official credit counseling organization to help you out.  You can surely do this on your own, but it would be better to work with professionals on this matter.

Lastly, keep track of the monthly statements to ensure that the credit organization is indeed paying your debt off.  This way, you will not have any additional hidden charges down the line.

CONCLUSION

As mentioned earlier, paying your debt off is quite easy as long as you know how to plan it systematically.  However, you should not rest easy once you are able to pay the total amount.

After all the transactions are done, let this serve as a lesson for you on financial discipline and responsibility.  This way, you will never go in debt again.

RELATED QUESTIONS:

1. WHAT ARE THE ADVANTAGES OF HAVING A DEBT MANAGEMENT PLAN?

  • Helps with budget organizing
  • Credit card consolidation
  • Reduction of creditor calls and visits
  • Credit score and report improvement

2. WHAT ARE THE SIGNIFICANT CONSIDERATIONS THAT YOU SHOULD MAKE BEFORE DEBT MANAGEMENT PLAN ENROLLMENT?

  • Proper Company Selection
  • Background Checks
  • Financial Counseling