Why you need a debt management program

Are you bogged down with credit card payments?  Do you miss payments because you just do not have the money to pay them?  There are companies that will help you get this resolved.  Debt Management Programs (DMP) can help you reduce your debt while still maintaining your credit score.

A debt management plan is NOT a loan.  In a typical program, debt management companies work with creditors on your behalf to reduce your monthly payment and interest rates on your debt and waive or reduce any penalties. The parties agree on an affordable payment schedule that allows 3-to-5 years to pay off your debt.

A debt management plan is part of the package of debt consolidation plans that are designed to help people regain control of their finances while reducing unsecured debts. An unsecured debt is one that is not backed by collateral, and includes credit cards, medical bills and student loans.

It is one of several ways you can take control of your debt and reduces the number of payments you make each month and can save you money in interest and fees.

Those who enroll make monthly deposits with a credit counseling organization, which then is used to pay the debts according to a predetermined payment schedule developed by the counselor and creditors. Your monthly payment is tailored to what the customer can afford, and you know before agreeing to take part in the program what that monthly amount is. An analysis of household income vs. expenditures determines the monthly payment.

Advantages of a Debt Management Plan
It will help you stay more organized and punctual with your bills and payments.
It creates a realistic monthly budget with a financial goal.
Making regular and timely payments can improve your credit report and credit score over time.
Creditors or collectors have incentive to stop calling.

Signing up for a Debt Management Plan

If you decide a debt management plan is right for you, your credit counselor can help you enroll. He or she will work with your creditors to negotiate interest rates and to come up with a payment schedule, which you will review and approve before beginning the plan.

Once it is determined how much money is left after basic living costs like rent, mortgage, utility bills, secured loans and living expenses are paid, the remaining amount can be divided among creditors.

Then, you’ll make a deposit monthly to your credit counseling organization. In turn, the organization will distribute the money to your creditors according to the agreed-upon payment schedule.

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