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10:26 am - Monday September 26, 2016

Defining A Debt Management Plan

| Managing Debt | Rating: 4.5
by Numan

Consumers usually engage a debt management plan for their financial circumstances. Sometimes you get into a serious situation where you are incurring a lot of debt and are diving down financially. You begin worrying about what the future brings, and you become stressful to the point of refusing to answer your phone calls because of the trauma that debt collectors bring to you. You begin to look at different options available to you, and while one of these options is filing for bankruptcy, you still pursue other less shameful avenues.

Turning to a debt management plan becomes crucial as you explore what it is exactly, what it can provide you in terms of financial alleviation, and what are its limitations. First of all, a debt management plan is a way to meticulously reduce your debt and it is complimentary with the credit counseling service. While the program does not take away debt entirely from your financial horizon, you begin to search for its positive characteristics.

A debt management consultant affords you the convenience of paying your debts to the different creditor banks indirectly, without the need for facing your creditors individually. The consultant works out a deal with the creditors while giving you the affordability and opportunity to be able to make monthly payments to lower your debts significantly over a given period of time. This includes negotiating for lower interest rates and the possible waiving of late fees and other surcharges.

The payment is done in single monthly tenors which are distributed to the different creditor banks. The payments are primarily for unsecured debt which includes credit card debts, shopping accounts, medical expenses and student loans. These are not applicable to secured debt such as car payments, rentals, mortgages and utility bills. Personal expenses such as divorce settlement and child support are excluded from the debt management plan. With the regular payments being done by the debt consultant to the creditor banks, collection efforts by the latter could be stopped.

These services are of course given at a price. Even outfits who profess non-profitability do charge for certain fees, and sometimes these fees are paid even before the actual services are rendered. Checking the integrity of a company engaging in debt management services is also good. You can check with the Better Business Bureau, the Attorney General’s Office, or recognized consumer protection groups, and check the company for any existing complaints before entering into an agreement with the said outfit.

It is a known fact that there would always be rotten apples in a basket, and this is what verification of integrity is all about. Instances where prudence in choosing a company include watching out for a debt management plan which is doomed from the start and does not function well, information that is peddled on top of the regular fees, a plan given out but is not fulfilled in terms of prompt payments, and worse, if there are no payments given out at all, and you are left to face surmounting late fees and other charges.

Since you are paying for services which aim to bring you back to financial liquidity, it is best to be aware of what your expenses really mean and how much you are to shoulder before actually signing up for such services. The debt management plan is supposed to work out in 3 to 5 years. You should likewise be wary of the fact that a lot of people are not able to maintain their plans and are thrown back to the pit of indebtedness. Just as in any workable activity, you have to see to it that monthly payments according to the terms of the plan are strictly adhered to in order to avoid default and assure success in your debt rehabilitation.

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