How to Become Debt Free – Debt Management Plan
Many people are not sure what is the best way to get rid of their debt: debt management or consolidation. In this article, we would like to tell you about credit debt management as well as debt management services that help people with this process. After reading this article, we hope that you will be able to find out for yourself whether debt management solution is a right choice for you and how it can help you.
What is debt management?
A debt management plan (DMP) is an agreement with a debt relief agency that you will be paying back your debt on monthly basis. In return, they will talk to your creditors to reduce interest rate and/or monthly payments after (usually) 3 consecutive payments as well as give you advice. Here are some debt management pros and cons:
- One monthly payment - debt management agency distributes your payment to all your creditors as agreed, so there is no need to track multiple payments;
- Lower interest rate – a debt counselor can possibly negotiate a lower interest rate on debtor’s behalf;
- No more collectors running after you and giving calls in the most inconvenient time;
- Debt repayment – you will not only be able to repay all your debts in full but will also save your credit history;
- No need to take a new loan – debt management is just an enrollment into a program that enables a person to become debt free with help of advice, step by step plan and negotiation with creditors.
- Most agencies require that a debtor closes all credit cards to ensure that no more debt is accumulated;
- You still need to find funds to make payments and they better be regular;
- In most cases, only unsecured debt can be taken care of;
- Some creditors might not want to participate or give better terms. If it is just one out of many of your debts, a debt relief management plan might still be a good solution for the remaining debts.
Need help choosing the best debt relief option for you?
Who can help me manage credit card debt?
Credit card debt can bring you many problems. Debt can grow very quickly, and it is very difficult for many to get rid of it. This can be problematic without a good loan debt payment plan. However, if you found yourself in a debt rut, it is likely that you were not able to create and/or follow such a plan.
Thus, there are debt management companies that help people not only to create the best debt management plan, but also teach you skills and give tips to help you actually follow this plan. Most suggest and even require a person to close or not use all the credit cards. As it was said before, if you are able to follow through with the agreement, you have a chance that your creditors will reduce your interest rates and your monthly payments will be lower.
Moreover, your counselor will initially sit down with you to calculate how much you have left to repay. Then, they will estimate what part of your income will be spent on your basic needs and how much will be left for debt repayment. Thus, before going on an appointment, think about and write down all your monthly expenses that you have.
He or she will evaluate if your income will be sufficient to repay the debt on time and maybe even earlier. A good counselor will also let you know about possible ways to increase your income and where you can cut your spending to put you in a better position for timely debt repayment.
You will have a visual plan in front of you that will help you to effectively divide your income for all your needs and know your limits. You will also be setting aside a specified amount of your income and your debt management company will then distribute it among all your creditors, so you would need to manage only one payment.
In fact, you do not even need to go to a debt management office at all. Online debt management programs are just as effective at helping your reach your goal and are easy to contact no matter where you are.