What You Should Know About a Debt Management Plan
Debt Management Plans, or DMPs, are a type of credit counseling, and are intended to help people pay off their debts. These programs can reduce interest rates, reduce monthly credit card payments, and even stop collection agency harassment. They are most commonly used by consumers with unsecured debt, and are available through a variety of nonprofit and for-profit companies.
There are a few things to remember before signing up for a DMP. First, make sure the provider is licensed and authorized. Check with your state Attorney General’s office to verify. You may also want to ask your credit counselor for advice.
Another thing to consider is the length of the plan. Most plans are three to five years in length. However, they can take longer. In some cases, they can last up to forty-eight months. Also, it’s important to remember that a debt management plan is only meant to be a part of your overall budget, not a standalone solution. If you are able to come up with a better budget on your own, you might be able to pay off your debt sooner.
Before you sign up for a DMP, be sure to read your contracts and find out how much you will be charged. Many debt management programs offer free services to their clients, but there are also a few that charge fees. Fortunately, many of the better ones are nonprofit organizations.
A good DMP can save you from being in over your head, but it can also negatively impact your credit. For example, opening new accounts too quickly can hurt your score. Even more so, a DMP can make it difficult to get additional lines of credit in the future.
While there are a number of other options, including bankruptcy, a DMP is a viable way to eliminate debt and start building your credit. Keep in mind that you will need to be willing to work hard to meet your obligations and live within your means. Some debt management plans also require you to close your credit cards and use only cash. This can be a challenge, but if you can handle it, it can be an excellent financial move.
It’s always best to get some professional help before you embark on a DMP. For instance, some companies will work with you to design a personalized budget. They can also give you advice on how to avoid slipping into debt again in the future. Taking the time to consult a certified counselor can help you get out of debt faster.
Finally, you will need to find out the best way to repay your debt. Often, you can get a reduction in your interest rates by negotiating with your creditors. And, some debt management programs even offer a single credit card that can be used in emergencies. As long as you pay your bills on time, the best thing about a debt management program is that it’s not a one-size-fits-all solution.
What You Should Know About a Debt Management Plan was first seen on Help with My Debt