Consolidating your debt into a single payment is one of the best ways to get rid of stress, not debt. It is a strategy used by many people who want to combine their debt into one in order that they pay only a single monthly payment, usually lower interest rate and longer repayment period. Now, what’s a debt management plan? Take time and learn if this is the solution for you, so keep reading for more about it.
How a Debt Management Plan Works
A credit counselor sits down and reviews your personal finance and budget. He or she will spend up to 90 minutes in reviewing these things. Then, he will provide you with an advice or recommendation on how you can control your spending and reduce debt. After, he or she will provide you a new budget plan, which suits your situation.
What to Remember
- Under a debt management plan, unsecured debts may be included, but then secured loans, including home equity loans, mortgages, auto loans and student loans are not.
- The collection debt may be included in the debt management plan only if the collector is yet to receive a wage garnishment following a court judgment.
- Your credit cards should also be closed, so no new credits should be obtained under the plan.
At the end of the day, you must remember that the plan is only one component of the debt solution. The DMP is also a voluntary agreement that’s among three parties – the creditor, the client and the financial counselor. If it becomes successful, each party will meet his or her expected goals.
How DMP Works
- You (the client) will attend a session, which will discuss the repayment plan and your budget. You will also be offered certain educational materials as well as finance advice from the counselor.
- The client’s financial and debt data will be entered into the DMP system. If you’re a qualified candidate, a plan will be proposed. The proposal will be submitted to the creditor according to the debt management plan that’s created using your information.
- You will then have to sign up for automated payments; each payment will be transferred from your bank account to that of the creditor’s using an electronic transfer to ensure you’re payments are on schedule.
- The DMP service will send you a monthly progress report that you can review and compare to the creditor’s statement.
- The DMP payment will stay the same, and the extra funds will be split and used to pay off the remaining accounts once one debt is paid off. **You can report any discrepancies or issues or if your current financial situation changed to the debt management company.
Is a Debt Management Plan for You?
There is no definite answer to this question. It pays off to consult an expert advice to understand if it fits your current situation and if it is what best works to help you pay multiple debts. For assistance you need, do not think twice consulting us today!