What is a Debt Management Plan?

A personalized, step-by-step and a systematic approach for paying off 100% of all the consumer’s debt’s is called a Debt management Plan, the consumers makes a single monthly payment to any of the credit counseling agency and the agency manages the payment of the funds to the respective creditors. Debt Management Plans may not be the perfect solution for every debt ridden consumer, there are some warning signs for those who feel like they are in over their heads when it comes to managing their Debts. Any consumer needs to ask himself a set of the following questions: • Do you put more than 20% of my income toward non-mortgage debt? • Do you struggle to make your monthly payments? • Do you live paycheck to paycheck with no savings? • Do you pay with credit cards because cash is not available? • Do you think about how much easier life would be if you could repay debt?

If “Yes” than the consumer should talk to a credit counselor. Yes their are many benefits which are often realized by those who join a Debt Management Plan.

Eliminate the aggressive, persistent and unpleasant calls from debt collection agencies. Though the calls will continue for about the first 90 days while the creditors process the debt management proposals. But it enables the consumer to tell the collectors about the debt repayment program and refer them to the respective agency. Eventually the debt collection agencies usually stop calling you. It definitely reduces the stress and the pressure. Prior to joining the plan, consumers find themselves floundering to get out of the stressful situation, but they’re not sure what to do. Consumers who are following a program get continuous counselling and guidance till they ultimately eliminate their debt. Having someone to consult with about your credit and debt issues can also help to reduce your anxiety. And finally the plan is meant to help consumers regain control of their finances. Make just one monthly payment. Most of the debt management plans consolidates the consumer's obligations into one monthly payment which is disbursed electronically to each of the creditors. A typical plan allows a consumer to pay off the debts in full without putting them in even more financial danger.

Avoid bankruptcy. Many consumers consider bankruptcy as resort. Although bankruptcy may be a viable option, many times, a debt management plan is a better alternative. A consumer credit counselor may not provide legal advice, but definitely helps determine what would be in the best interest of the consumer. Lower interest rates, late and over-limit fees. When a consumer demonstrate an intention to pay back 100% of his/her debt, creditors do make concessions to the original agreement to enable the consumer to pay back their debts. the Creditors also many times accommodate Interest rate reductions and waived late and over-limit fees are some of the occasional benefits as well for a consumer going in for a debt management plan. Every creditor does offers their own unique concessions to a consumer with a firm intention to pay back their debt. Shorten payoff time. A debt management plan has to estimate your payoff time. After receiving allowances from the creditors, more of your monthly payments will be credited to your principal balances, allowing you to shorten the duration of your payoffs. Become debt free. Debt management plans help you become debt free. A perfect plan is the one which helps the consumer with their budgets, provides the financial education to assists them in getting out of the debt and plan a bright financial future.