Debt Management

Debt Management Plan

Recent research has indicated that the amount of people with debt problems is increasing year on year. With the recent financial crisis and companies cutting employees hours, more and more people are finding them with debt problems. If you have debt problems, rest assured that you are not alone.

There are a number of financial options available out there for help with debt. These include things ranging from IVAs and debt consolidation to a debt management plan. A debt management plan will enable you to pay back a realistic sum each month, based on what you can actually afford rather than what your creditors are demanding of you. Remember that debt management plans are flexible and non-legally binding, which means you can often adjust your payments to meet your financial situation. This also means that your creditors are not under any obligation to accept the terms set out in them.

When you speak to a credit counselor you will become familiar with the term Debt Management Plan, which is an integral part of the credit counseling process. The fist step once you enter credit counseling is an experienced credit counselor will analyze your income, expenses, and debt and will be able to develop a strategy to attack your debt effectively.

Once your debt has been analyzed, and you completely understand what you're getting into you will become enrolled in a debt management plan. Once you enter a debt management plan you will start reaping some of the primary benefits of a debt management plan which is reduced payments.

Your payments get reduced through the Debt Management Plan because your accounts will be closed and in lieu of making payments to a bunch of individual accounts you will make one consolidated payment to the credit counselor, typically your consolidated payment will be less than the sum of your individual payments to your individual creditors. Many counseling agencies tout they can decrease your payments by 50% to 75%, but in reality your payments will typically be lowered by 10% to 20%.

Another huge benefit of a DMP is it serves as an instrument of negotiation for you and your credit counselor. Once in a DMP, a creditor recognizes that you are in credit counseling and will typically acquiesce to better terms and a lower interest rate. A lower interest rate normally translates into lower overall debt so lowering your interest rate is in your best interest. 

The third benefit of a DMP is something called "curing" or "reaging" of an account. "Curing" is the process of making delinquent accounts current. For example if you have an account that is 60 days late a credit counselor can negotiate that if you make the monthly payment for three months straight than they will bring your account to a current status.

A lot of times when your bogged down with debt you can be overcome with negativity and you can't see the light at the end of the tunnel. Entering a DMP will help you give you hope and assist you on your journey to becoming debt free.

For more detailed and informative advice, see a reputable debt management plan firm.