Debt management can help you get out of debt through the help of a credit counselor – but it is not always the right solution for everyone. Before you decide to use this program, you need to analyze your debt and financial situation. Once you have a firm understanding of the problem and your ability to pay it off, you need to understand the debt relief process. Only then will you understand if this debt consolidation strategy suits your specific credit issues and your financial position.
For instance, if you are too busy to monitor your debts, then getting the help of a credit counselor to manage it for you might bring a lot of benefits to your financial position. You might be surprised at what they can do to help you out. According to reports, a lot of Americans decline to get financial help or even simple advice. 3 out of 4 Americans manage their finances on their own. While it is admirable that most of us are trying to work on our finances on our own, the presence of so much debt might be a sign that something is wrong. This is especially true if the average credit card debt and delinquency rates are rising.
If you had been managing your debts and finances on your own and it seems like there is no positive change that might be a sign that you need to get the help of a debt professional. If you want to consolidate your debts, you might want to use debt management to make it happen.
What is debt management
Debt management is an effective debt relief program that will bring a couple of changes in your repayment plan. It is not one of the risky options to consolidate debt and it is very effective in getting you out of debt.
Here are the important truths that you need to know about this debt solution.
Enlists the help of a credit counselor
The most prominent feature of a debt management program is the presence of a credit counselor. These debt experts will work with you and discuss your debt and financial situation. They will not just help you create a personalized and effective debt consolidation plan. They will also educate you about basic financial habits. These are the habits that will hopefully help you stay away from debt after you have paid it all off.
Involves a debt management plan
All the information that will be given to the credit counselor will be used to create the DMP or debt management plan. This is the new repayment plan that lists all your credit accounts and the amount that you can afford to pay for each debt every month. The credit counselor will show this to your creditors and lenders for approval. Once approved, this will be the repayment plan that you will follow from then on. Failure to stick to the plan will forfeit any discounts or lower payment that was negotiated – so try to stick to this until you completely pay off your debts.
Simplifies your monthly debt payments
One of the benefits of debt management is that it simplifies your debt payments. Instead of paying different accounts each month, you will be sending one payment to the credit counselor. They will take charge of distributing the payment to the various creditors and lenders that you owe money to. This will make things easier for you – allowing you to focus on earning more money.
Possible lower interest rate
This is not a guarantee – but the credit counselor will try to negotiate for a lower interest rate. They may even try to have some of the fees waived. But do not pin your hopes on getting this approved. If it is approved, you get to save more money.
Other facts about debt management
It is important to remember that debt management does not involve a loan. Despite that, it can help you get out of debt in a couple of years – around 5 years or less. Make sure that you are truthful about your financial situation – especially how much you can afford to pay each month. Do not approve of the debt management plan unless you are sure that you can afford it.
You will also be required to pay for the services that you will get. If you will just get credit counseling, there are a lot of non-profit organizations that provide this. However, if you decide to proceed to debt management, you will have to pay a monthly fee.
Signs that debt management is the perfect solution
Now that you have a bit of understanding about debt management, how can you be sure that it is the right debt solution for you? Here are three signs that you might want to look out for.
When you need professional assistance
There are people who are really good at handling their finances. These are the people who have not landed in debt. However, if you do not have the natural ability to manage your finances, then it is worth it to get someone to help you with it. Sometimes, paying for a debt relief service is beneficial in the long run. If the debt expert can help you stay on track, then that is more valuable than you think. Their assistance will allow you to focus on other things – like earning more money for debt payments and other financial goals.
When do not have time to handle debt on your own
Sometimes, it is not even your inability to manage your debts that will push you to hire someone to help. There are those who simply do not have the time to focus on their debts. If you are one of the people focusing on paying down their debts but you do not have the luxury of time, there is a chance that you will forget or delay other financial goals. This does not have to be the case. Having a credit counselor helping out can ensure that your payments will always be sent on time.
When you do not have a good credit score
Finally, debt management is right for you if you have a bad credit score. The credit counselor will not really care if you have a bad credit reputation. They will still help and negotiate your debts for a lower interest rate. It is not like debt consolidation loans that require a good credit score to get the best terms.