For people who find themselves in overwhelming debt, lowering or eliminating their monthly outgoing payments is usually their number one priority. However, that is easier said than done. For those serious about ridding themselves of debt, utilizing the services of a debt management company may be a viable option. Before making a decision, it’s best to learn about the what a debt management program actually entails.
What is a Debt Management Program?
A debt management program focuses on helping people pay down their unsecured debt over a period of time, which usually ranges from 36-60 months. In this type of program, consumer’s will pay back their FULL amount of debt but at a reduced fixed interest rate the creditors are willing to take, assuming the consumer qualifies to enroll in the program. These programs generally will get the consumers out of debt within a specific time frame as long as they follow the structured debt management program that the creditors agree to.
How Do I Enroll in a Debt Management Program?
Enrolling in these programs is done by contacting a company in the debt and credit industry to discuss the specifics of your situation to see if you qualify for a DMP (Debt Management Program). If the DMP is a good viable option, then a Debt specialist can usually assist you filling out an application over the phone and you can even (conveniently) sign the documents electronically. If you are approved for enrollment, monthly payments are deposited with the DMP company and used to pay your creditors in the amounts the creditors have agreed to accept. A payment schedule, along with the monthly payment, is all tracked electronically so the consumer knows what is going on and where the funds are being disbursed every step of the way.
Advantages of a Debt Management Plan
Those who enroll in these programs can not only relieve much of their debt stress, but also have other advantages as well. These can sometimes include some of these benefits (not all will apply in every case):
This type of Program may offer you some of these benefits:
- Stop collection calls
- Reduce or eliminate interest rates*
- Will not affect your 3 digit FICO credit score as long as you remain current*
- Administered by a NON-PROFIT service provider*
- Consolidate all of your unsecured debts into one monthly payment
Key Points to Remember When Choosing a Debt Management Company
While these programs do offer numerous benefits to consumers who are dealing with debt problems, there are several key points to remember prior to signing on the dotted line. For example, most payment plans are from 36-60 months. It’s also important to remember that while enrolled in a program, customers may be restricted from using any additional credit cards as well as applying for any additional credit. Most of all, the payments must be made on time. If they are late, there’s a possibility that any previously lowered interest rates or fees may be rescinded, making it more difficult to stick with the original payment plan. Lastly, not all kinds of debt are eligible for debt consolidation or debt settlement. Because of this, it’s best to contact the debt management pros and get help to ensure you are on the right path out of debt!