A debt management program is the method by which a debt expert guides debtors and shows them all the possible solutions of leading a debt free life. In a debt management program, the credit counselor suggests the various methods to do away with the existing debts and also educates the debtor to manage debts effectively in the future. The credit counselor from whom you receive professional guidance about reducing your debts should have thorough knowledge of the subject.
Your existing financial condition is evaluated
The program prioritizes your debts like council tax, bills for utilities and mortgage payments. It also takes into account the amount you can shell out every month for paying debts in addition to the expenditure incurred on daily needs. After calculating this, if there is any money in excess, the same is deposited with the debt management company hired by you and they in turn distribute the money to the creditors.
Negotiating with the creditors
The debt management company works on your behalf and they can be of immense help in your efforts to reduce debts. The company does all the negotiation for the reduction of interest rate currently applicable to your debt accounts. The main reason why the creditors agree for a reduced rate of interest is that by doing so, they stand a better chance to get back the money they have invested for the debtor. This would not have been possible if they sell the debt account to a debt collection agency.
When do you need a debt management program?
However, before your debts get out of hand, you should opt for a debt management program at the correct time or it may blow up your debts and render them uncontrollable. Let us see when you should think of opting for debt management program-
• A DMP is needed when you have many debts and are not being able to handle them properly.
• If you have tried out self repayment plan but failed to get the desired result.
• You do not want your credit score to get tarnished; simultaneously you also want professional assistance in reducing your debts.
• You are constantly receiving harassing calls from the creditors and they are also threatening to file a lawsuit against you.
A DMP has several benefits and the various benefits that may be availed by a debtor are as follows-
• The program helps in reducing interest rates thereby reducing your monthly payments too.
• You are not required to pay fees for late payment
• You stop getting collection calls.
• Finally you become debt free.
One important aspect that needs to be kept in mind is that despite the fact that the debt management company is managing all the debt for you but you are required to keep track of the proceedings as well. It is of utmost importance to keep a close watch that the payments are being made properly to the creditors.
Your existing financial condition is evaluated
The program prioritizes your debts like council tax, bills for utilities and mortgage payments. It also takes into account the amount you can shell out every month for paying debts in addition to the expenditure incurred on daily needs. After calculating this, if there is any money in excess, the same is deposited with the debt management company hired by you and they in turn distribute the money to the creditors.
Negotiating with the creditors
The debt management company works on your behalf and they can be of immense help in your efforts to reduce debts. The company does all the negotiation for the reduction of interest rate currently applicable to your debt accounts. The main reason why the creditors agree for a reduced rate of interest is that by doing so, they stand a better chance to get back the money they have invested for the debtor. This would not have been possible if they sell the debt account to a debt collection agency.
When do you need a debt management program?
However, before your debts get out of hand, you should opt for a debt management program at the correct time or it may blow up your debts and render them uncontrollable. Let us see when you should think of opting for debt management program-
• A DMP is needed when you have many debts and are not being able to handle them properly.
• If you have tried out self repayment plan but failed to get the desired result.
• You do not want your credit score to get tarnished; simultaneously you also want professional assistance in reducing your debts.
• You are constantly receiving harassing calls from the creditors and they are also threatening to file a lawsuit against you.
A DMP has several benefits and the various benefits that may be availed by a debtor are as follows-
• The program helps in reducing interest rates thereby reducing your monthly payments too.
• You are not required to pay fees for late payment
• You stop getting collection calls.
• Finally you become debt free.
One important aspect that needs to be kept in mind is that despite the fact that the debt management company is managing all the debt for you but you are required to keep track of the proceedings as well. It is of utmost importance to keep a close watch that the payments are being made properly to the creditors.
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