Debt Management Plans and Programs
There are numerous debt management plans and programs to choose from when seeking debt management assistance. With many debt management corporations closing due to fraudulent practices, you may be wary about approaching a debt management company. Legitimate, non-profit debt management agencies do exist, but you must exercise caution and increase your knowledge of how debt management companies work before trusting your financial future to an agency.
What to Look for in a Reputable Debt Management Company
A reputable debt management company offers a wide variety of useful debt management plans and programs for the consumer. These should include education on proper money management skills to prevent a reoccurrence of overwhelming personal debt.
A reputable nonprofit debt management company is a popular choice for most consumers seeking assistance with debt relief. The choice between a nonprofit and a traditional debt management company is purely a personal decision.
A reputable organization will readily divulge how its employees are paid. Some agents operate on commission based on the number of services and programs that they sell to consumers. This is useful information before you give in to a high-pressure sales pitch for services you cannot afford nor want.
A company that is directly reimbursed by collection agencies or creditors should be approached with caution. They may not protect your best interests if they are financially dependent upon your creditors. If the company pushes you to enroll in a debt management plan or program without providing some form of credit counseling or collecting in-depth personal financial information, you should beware. Most likely, this type of debt management company strives to enroll every consumer in a debt management plan or program to boost sales., regardless of whether it is in the consumer’s best interest.
Debt Management Plans
Debt management plans are often a smarter solution than seeking out a debt consolidation loan or service. Most debt management plans include some form of credit counseling. Money management education is essential to prevent a reoccurrence of uncontrolled personal debt. Most debt management plans are similar in structure. They provide you with one payment every month and most relieve your debt in less than 60 months. Some debt management programs are completed in as little as 36 months.
If your debt management company cuts a deal with your creditors to settle for a lower repayment amount, this could adversely affect your credit rating. Most debt management companies can negotiate waived fees and a lower interest rate without negotiating a settlement offer that will affect your credit rating. Be sure to discuss your options with your credit counselor.
What to Expect
Most nonprofit debt management companies will charge an initial set up fee of $75 or less to create your account. Some charge a low monthly fee, while others recommend an optional monthly donation to help support the organization. These donations are completely voluntary, but some companies employ high-pressure tactics to increase donations. Some companies do not charge an initial set-up fee, but do incorporate a monthly charge, usually around $50. If you cannot afford this extra charge, always ask if there is any way to waive this fee. Many companies will eliminate the monthly charge, but you must ask for it.
Collection activities generally cease once you enroll in a debt management program, but some creditors may continue to solicit you for money. Overall, the number of harassing calls and letters is greatly reduced by enrolling in a debt management plan or program.
Tips for Making Your Debt Management Plan a Success
After you enroll in a debt management plan or program, keep all of your credit statements in a binder. Continue to check each monthly statement to ensure that the debt management company is paying adequate amounts in a timely manner to each of your creditors. Be sure to report any fees, charges, late payments or suspicious activity to the debt management company immediately. If you suspect your debt management company is committing fraud, immediately cancel any checks going to the company. Immediately report your suspicions to the police, the better business bureau, and your creditors. Your creditors are not obligated to work with you if you are a victim of fraud, but most will.
If you are able, set up automatic deposits to ensure that your monthly payments to the debt management company arrive on time each month. If possible, try to get a month or two ahead on your monthly payments and apply extra cash toward your debts to help pay off your obligations sooner.
Make sure that your chosen debt management company is licensed to operate in your state. Also, ask about what type of training and certification the company’s credit counselors receive. A reputable company will have an extensive training program for employees. State certified counselors are a bonus, and are a good sign that the company is credible.
Finding reputable debt management plans and programs takes work and research on your part, but the end result is often a solid plan that provides debt relief in a reasonable amount of time. Educate yourself, keep detailed records and safeguard against fraud by asking specific questions and researching the business before signing a debt management agreement.