Debts can be overwhelming. For this reason, paying off the your bills at the earliest opportunity is always recommended. If you’re unable to manage it yourself, you can try to get debt relief through a debt management plan (DMP).
What is a DMP?
A debt management plan or program (DMP) is a typical debt relief program where something more than simple budgeting is done to resolve your debts. Usually, the services of a debt management company include initial financial counseling and negotiation with your creditors to help you get lower interest rates on your bills. This, in a way, reduces your monthly payments and makes it a lot easier for you to repay your bills.
Which debts are eligible for a debt management plan?
Unsecured debts such as credit card bills, medical bills, student loans, payday loans, tax debt, department store cards, personal loans, and unsecured line of credit can be managed through a debt management plan.
When should you approach a management company?
Ask yourself the following questions to see if you really need debt management help or assistance from a legal debt management company.
- Do you have multiple high interest debts?
- Are you having trouble in managing your monthly bills?
- Have you already opted for a self debt repayment but failed?
- Do you want to get respite from the harassing collection calls?
- Are you thinking of filing for bankruptcy?
If any of the answer to the above questions is yes, then you should get debt management assistance immediately.
What are the benefits of debt management programs?
Whether you get enrolled in a credit card debt management program, or simply in any other debt management plan, you receive many benefits. Some of the prime benefits have been stated below:
- Your unsecured debt payments will get lowered.
- Interest and other penalties will be reduced or eliminated.
- You'll be paying a single monthly payment rather than many.
- Your credit score will improve over time.
- You'll get out of debt faster as your interest rates will be reduced.
- You'll be avoiding a disastrous step like filing bankruptcy by getting into a DMP.
- You'll put an end to all your financial stress and hardships as you'll work with professionals.
Does debt management harm your credit rating?
Consumers usually believe that if they get enrolled in a debt management program, their credit would be destroyed. However, this is not the truth. In fact, improvement in credit score is one of the benefits that you can have from a debt management program. According to the FICO website, programs like debt settlement or bankruptcy can harm your credit rating, but a debt management will never do.
How to select your debt management program?
If you want to keep up on your debt payments with a DMP, check out these 7 tips to make sure that you choose the right plan.
1. Agree on a plan that you can easily afford: When selecting a DMP, you should stick to the one you can easily afford. If you agree to a debt elimination plan with high monthly interest rates on your payments, it can only add to your debt problems. If you come across an online debt management company with a plan that you cannot afford, it is better to look for another alternative.
2. Get approval from your creditors regarding a DMP: A DMP will not work out well if the proposed plan is not approved by your creditors. Inform your creditors that you are enrolling in a DMP, and make sure that you have their approval.
3. Do not default with your payments: Make regular payments on your debt accounts, as this helps improve your credit report. You also need to make regular payments on your DMP. If you stop making payments abruptly, it can hurt your score.
4. Have everything properly signed: Avoid opting for a company that provides only verbal agreements. Always get everything in writing and read the agreement before you sign. Make sure that the monthly fees and duration of the program are as promised before you sign. This can avoid any problems later.
5. Make sure the fees are reasonable: If the company charges high fees along with separate fees for the application, enrollment, and consultation, you may end up paying more than you can afford. It is therefore advisable that you find out exactly what fees are charged by the company beforehand.
6. Maintain a record of your payments: This helps you to keep track of your payments so you can understand what is happening if any issues arises regarding late payments. Also keep note of how the payments are disbursed so your creditors receive payments on time.
7. Ensure privacy of personal information: You need to provide certain information to the company while in a DMP. Get a written contract from the company to ensure that your personal information is safe.
By taking these tips into consideration you can easily look forward to a successful DMP that will help you regain your financial stability.
