How to Use Debt Management

A debt management program will give you one solution for your debt if you have found that is has become too difficult to manage by yourself. Normally you go through a debt counselling service first and they can take you through the process of looking at the money you owe and what your options are. The next step that they will offer is how to tackle the situation; they might give you the tools so that you are able to do the work for yourself. This can mean contacting your creditors and working out a payment plan.

How to Use Debt Management

The other option that the counselling service might offer is to help you with your creditors and look at ways in which the payments can be reduced, this can be achieved through the debt management section of the company contacting your creditors and arranging to reduce the payments, this can be in a reduction of the interest rates that they are charging or the removal of late payment fees. What they won’t do is lower the actual amount that you have borrowed.

So, if you were thinking about going to use debt management as a practical way to help you sort out your financial situation. It can help you look at how you are spending your money and suggest ways that you might be able to re-address your budget so that you become debt free sooner.

Getting the Full Benefit

It is possible to do the work on your own; the debt management company is only doing what you can do yourself. But they will have the experience and the contacts that can make talking to creditors easier, it is not their debt and this can make the talking about the situation easier and less confrontational.

If you are talking about your own finances it can become difficult to be professional and remove the emotion from the conversation and this can make the process easier to manage.

It can be important that when you are looking to set up a budget that you are not good with the details and this can be where if you were to use debt management they would help you and get the payments on time to your creditors.

Caution

It is important to note that whilst there are services that are available for free these are going to be limited to a very small group and it is important to understand that you are going to be charged a fee for using their services, even if they are a non-profit organization, they will still have wages and other bills which they will need to pay. This will mean that you will need to find the money each month to pay for their services, so if you choose to use debt management services then you need to be fully aware of all the costs before you agree to the plan.

Reason to Enroll In a Debt Management Program

  • Improve credit report
  • Steady income and can afford the payments
  • Ability to work towards becoming debt free in around five years

The Right Debt

It is important to realize that there is a difference in different sorts of debts and there is help available for the different areas, but if you use debt management plans be aware that they don’t work for secured debt like mortgages and any form of debt that is secured on items like your home or a vehicle.

The debt that the debt management plan can help you with is the type of unsecured debt; these typically are credit card debt, personal loans, and utility bills. They will not remove the debt and you will be expected to pay the debt off in full over time, the only reduction you might get is the reduction in the interest rates that are charged or the late payment fees that have previously been added to your debt.

When you have your first meeting with your counsellor they will go over the debt that you have and they will be able to tell you if the information that you have provided is going to be suited to a debt management program, they might think that there is another option that is better suited and they will tell you this after they have gone through your situation with you.

The Benefits

You will be able to benefit from being enrolled with a debt management program if you are struggling with unsecured debt and need your debts restructuring, or helping to pay the bills on time.

You will pay a monthly sum that will be agreed upon with your creditors and the debt management plan; this will include your monthly fee for the plan. The money will then be paid to your creditors as per the agreement that the company has organized for you.

It will show on your credit report that you are using the services of a debt management plan and this can have a negative impact with some companies. But over time you will be paying off your debts and this will improve, leaving you in a better financial position.