A debt management plan/program can help you if you are not able to manage your multiple debts on your own. A debt management plan is a structured repayment program that helps you to repay your outstanding debts/loans. It is also sometimes referred to as simply DMP. Usually, a credit counselings agency conducts debt management programs; however, there are several debt management companies that offer such programs.
When to take help of a debt management plan
You should go for a debt management program when you experience any of the following situations.
- You are not able to make your monthly debt payments on time.
- You’re using one credit card to pay the bill for another one.
- It is only possible for you to pay the minimum amount on your credit cards.
- You’re getting harassing calls from your creditors and collection agencies.
How a debt management program works
You can opt for a credit counselings session wherein a counsellor can analyse your financial condition and suggest you whether or not a debt management plan can help you to repay your debts.
After you enroll in such a program, a credit counselor will start negotiating with your creditors in order to reduce the interest rates on your debts, which in turn will reduce your monthly payments. The counselor also decides upon a single monthly payment with the help of which you can repay your multiple debts. It is also the job of the counselor to get it approved by your creditors. After you make the approved monthly payment to the agency, it will distribute the amount amongst your creditors on your behalf.
Thus, with the help of a single monthly payment, you are able to repay your multiple loans/bills.
How a debt management plan benefits you
A debt management program benefits you in several ways, which are listed below.
- You will get no more harassing calls from your creditors and collection agencies.
- A debt management plan will have no adverse affect on your credit score.
- The interest rates on your loans/debts will get reduced to some extent.
- You can repay your debts faster in comparison to normal debt repayment.
Tips to get success with a debt management plan
Here are some tips by following which you can ensure success with a debt management program.
- Always make your monthly payment on time.
- Accept a debt management plan that you can afford.
- Don’t apply for an additional credit while you’re on a DMP.
- Don’t pay any of your creditors directly unless it is approved by the agency.
- Monitor whether or not the counselings agency is sending the payments to your creditors on time.
- Don’t agree to anything verbally; always get the terms and conditions in writing.
Apart from helping you to repay your debts, a credit counsellor can also offer you suggestions on how to manage your personal finance responsibly. It will help you to avoid debt problems in future.