Debt relief is not a subject that is often discussed or debated in the public domain. When it comes to debt relief, it’s generally regarded as a question of individual responsibility and problem solving rather than being an emotive debate over issues such as personal worth. Debt management programs can help you overcome debt problems but debt is a problem that affects everyone in one way or another. There are lots of ways in which a person can get into debt but some people are capable of handling their financial circumstances better than others.
What is Debt Management?
The creation of debt management plan or DMP for short is aimed at helping individuals get back on track financially and assist them to repay debt effectively and quickly. A debt management plan is set up through a credit counseling agency. The debtor usually meets with a credit counselor from the agency in order to assess his financial situation as well as determine the best options available for his financial situation. Once the best option is determined, the credit counselor would then begin negotiating with creditors, seeking a low-interest rate, and late fee waiving payment plan which has to be repaid within a period of three to five years. The new plan consolidates all your credit card payments into one payment that is made through the credit counseling agency; who would distribute the money to the creditors. Debt management plan however, doesn’t apply for secured debt such as a mortgage or car loan.
A debt management plan offers many benefits besides consolidating all credit cards. It allows one to have a monthly financial goal which helps in making payment in a timely manner, preventing them from receiving calls from creditors as everything is handled through a debt management plan or DMP. Another benefit of debt management plan is that it helps lower the debtor interest rate which enables him to pay off the debt sooner since most of the payment goes toward the repayment of the loan instead of interests. Debt management plan provides a debtor professional advice on budgeting, home buying and other valuable workshops to help with managing his money better.
One main disadvantage is the fees that can vary among counseling agencies, and state regulations that one would pay to start a DMP account. The fees can range between $30 -$50, including a $20-$75 DMP participation fee. With a DMP. Another disadvantage includes having limited access to credit since the individual might be required to not open new credit cards; caused by the presence of DMP on your credit report.
Debt relief options
Many options are available when it comes to debt relief, it’s important that each individual researches the best option that fits his financial situation.
Non-profit organizations and debt relief services: These organizations can help sort out a person’s finances and come up with a plan of action. They will analyze a debtor’s specific financial circumstances and then set out to help in all areas that are relevant to one’s situation. Often time, expert advisors would help guide you through the whole process. However, you have to ensure that you’re comfortable with the given advice.
Private debt management programs: Private companies can provide a full range of debt management programs to suit a client’s individual needs. Their expertise, contacts and financial resources should provide the best possible debt relief option for one’s circumstances.
Credit card issuers: This is the most economical form of debt relief, although they may not suit all individuals. Should a person still have a credit card debt with a current lender, credit cards issuers would still offer debt management options to him. If such options are not being offered to you, then consider other debt relief services.
Debt consolidation loan is another option that offers a low-interest loan to pay off your high-interest debt.
Debt settlement is usually offered by for-profit companies where they negotiate with creditors to accept a lower amount than owed in a lump sum payment. However, there are a lot of risk with that option which we’ll cover in another article.
Bankruptcy is another debt relief option if you are drowning in debt. It will erase your unsecured debt such as credit card and medical bills. If you determine that debt management plan might be right for you it’s recommended that you start with a non-profit organization which you can find https://www.nfcc.org/ or https://fcaa.org/
It’s important to note that debt management is only one of many methods available to help manage your finances and it’s important to understand how it works before choosing a program for your circumstance. Understanding how it works involves doing research on the many available options.
The main parts of a debt management plan, which include consolidation and payment. Consolidation is usually the first element that is offered and involves your existing debts being taken into one single sum. This could include some smaller loans but can also involve the sale of some of your assets.
The second element of a debt management plan is payment. This will generally involve you making regular payments to the company that will manage your debt and be there to assist you with any problems which might arise from paying your debts.
For many people debt relief programs and relief plans provide the last hope of getting their finances back on track. The success of these programs and relief services rely heavily on the decision that you make, to begin with, so it’s important to do all you can to get yourself into a position where you can see a debt relief program through.
Overall debt relief programs and debt relief plans offer a way forward for many who find themselves in debt trouble. It’s important to remember that you shouldn’t feel that you have no options but that there are lots of options out there for you to get back on track financially.