When your debt becomes difficult to manage one way to take control of it is through a debt management plan. It is important no matter what way you get out of debt that you know all the facts about the program you choose. Each program will have good things and bad things, knowing how to navigate through them will help anyone interested in getting out of debt. This is also true of a debt management plan.
A debt management firm can help you create a debt management plan. This is commonly where an account is set up and you’re required to make monthly payments into. Then once this is complete the debt firm will negotiate with the creditors to lower your payments or pay off the amount owed to the creditor. The debt management plan is completed by allowing the debt firm to make the payments to your creditors on your behalf.
To Choose or Not to Choose
It is important to know if a debt management plan is the best choice for you. Sometimes an individual desires so much to have financial freedom that they can forget to look at both the good and the bad of a program.
- The Good: When working with a debt management company you will gain some help with your planning, as well as a liaison to your creditors. The liaison will be able to talk to the creditors about the reduction on interest rates, the reduction of your monthly payments, as well as the elimination of previous fees. With a debt management plan you will see the benefit within a short amount of on time payments, and your debts will become paid in full. You will have a less negative impact on your credit as well as being able to stop collection activity on your debts.
- The Bad: There are also some negatives when working with a debt management plan. Some creditors will not participate in programs like this one. The biggest downside to a debt management plan is that you have to make the payments on time while in the program or the program can be withdrawn. Most importantly you can’t add any debt of any kind.
Reality of Promises
Many debt management companies will promise ways to fix your debt that seems unreal. They may promise that they can do things that just aren’t possible.
- Debt firms will tell you that you’re unable to create or follow through with a debt management plan on your own. This isn’t true; you can choose to create your own plan. Examine your expenses, which mean the bills, the debt, as well as the non-essential expenses. Then determine which items are unnecessary or that can be trimmed. For example reducing the cable stations you use or pack lunches rather than eating out. Take any extra money that you will have and apply it to the debt management plan that you created.
- Empowering yourself can be an important step to financial freedom. This can be done through negotiating a debt settlement on your own. This many sound like something that can only be achieved through a debt relief firm, however you’re able to do this yourself. Contacting your creditors when you are behind in payments can be your first step to creating your own debt management plan based on settlements. Tell your creditors what you are going through to cause your financial hardships and that you’re in need of help. If you are willing to offer a lump sum or discuss a new payment plan many creditors will work with you. As with any debt management plan the creditor does not have to agree even if the debt firms promises that they will.
- One important thing to remember is that each company is designed to stay in business. Sometimes individuals can become deeper in debt than when they started the debt management plan process. This can sometimes happen because the debt firm doesn’t make the payments on time or doesn’t make them at all.
- A debt collection firm can’t promise that you will be able to have all of the delinquent accounts removed from collection agencies. They are able to try to negotiate this with the creditor, however this is a promise that no debt management plan can make.
- Debt relief firms can promise lots of ease, however that ease can come with a price tag. They are able to help you with your credit card debt but you may not realize the enormous fees that you are being required to pay.
When you’re in debt one of the most important things is gaining financial freedom. Not all plans are the same, and there isn’t one plan that will fit everyone’s needs. Be sure to shop around, determine the best debt management plan for your needs.