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 a passionate debate over personal worth issues.
Debt management programs can help you overcome debt problems, but debt is a problem that affects everyone in one way or another. There are many ways in which a person can get into debt, but some people can handle their financial circumstances better than others.
What is Debt Management?
The creation of DMP or Debt Management Plan aims to help individuals get back on track financially and assist them in repaying 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 to assess his financial situation and determine the best options for him. Once the best option is selected, the credit counselor would begin negotiating with creditors, seeking a low-interest rate and a late fee waiving payment plan that must be repaid within three to five years.
The new plan consolidates all your credit card payments into one payment made through the credit counseling agency, distributing the money to the creditors. However, a debt management plan doesn’t apply for secured debt such as a mortgage or car loan.
A debt management plan offers many benefits besides consolidating all your credit cards debts. It allows you to have a monthly financial goal that helps make payments promptly, preventing you from receiving calls from creditors as everything is handled through a DMP.
Another benefit of a debt management plan is that it helps lower your interest rate, which enables you to pay off the debt sooner since most of the payment goes toward the repayment of the loan instead of interests.
The debt management plan provides you with professional advice on budgeting, home buying, and other valuable workshops to better manage his money.
There are some minor disadvantages when you are in a debt management plan.
One main disadvantage is the fees that can vary among counseling agencies and state regulations that one would pay to start a DMP account.
There is a monthly fee between $30 -$50, in addition to a $20-$75 DMP participation fee to start the program. Another disadvantage includes having limited access to credit since you might be required not to open new credit cards, caused by the presence of DMP on your credit report.
Debt relief options
There are several options available when it comes to debt relief, and you are encouraged to spend some researching which one might be the best option according to your financial situation.
Non-profit organizations and debt relief services:
These organizations can help you sort out your finances and develop a plan of action for you. They will analyze your specific financial circumstances and then set out to help in all areas relevant to your 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 your 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 card issuers would still offer debt management options. If such options are not being provided to you, then consider other debt relief services.
Debt Consolidation Loan
The 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 negotiating with creditors to accept a lower amount than owed in a lump sum payment. However, there is 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 cards and medical bills.
It’s important to note that debt management is only one of many methods available to help manage your finances, and it’s essential to understand how it works before choosing a program for your circumstance. Understanding how it works involves researching the many available options.
The main parts of a debt management plan, which include consolidation and payment. Consolidation is usually the first element offered and involves your existing debts being taken into one single sum. This could consist of some smaller loans but can also affect the sale of some of your assets.
The second element of a debt management plan is payment. This will generally involve making regular payments to the company that will manage your debt and assists you with any problems that 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 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.
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 many options out there for you to get back on track financially.