A Debt Management Plan is a structured repayment plan set up by a designated third party, assisting a debtor with his/her debt repayment. The primary aim of debt management is to help clear the outstanding debts at a reduced level over a fixed period of time so that the debtors can avail the opportunity to start fresh on their financial terms.
This plan is also beneficial for those who are stuck in debt with their creditor (The creditor is a company wherein the person owed money). This is done after all the payments for the necessary things such as utility bills, mortgage, etc. have been settled. The money left is then equally distributed to the creditor every month respectively.
Debt Management Company
As a debt management company, we help you take control of your debt issues effectively. We offer you the knowledge to reduce or eliminate the existing levels of your debt while helping you to understand the factors that have led to your debt situation and how to avoid them in future.
Making a monthly budget and keeping to it may well be an essential financial decision anyone can make, but few people make the effort for budget planning. You can create a realistic budget plan to safely carry yourself forward into the future once your debt has been eliminated or minimized. We are well-known for providing proper tools and guidance to remain debt-free.
How does Debt Management Work?
First you need to opt for a debt advisor, as they will first come up with efficient ways through which you could save money on the basis of your budget. They will then help you carry out an assessment of your financial situation and debts by asking you a series of questions. The key agenda of following these questions is to get a more accurate picture of your finances. Keep in mind that they must believe in establishing a trustworthy relationship with you so that you can be completely honest with them upon the discussion of your finances to get the required help you need.
They use this information to calculate how much you can comfortably afford to pay each month out of your surplus income. Once this amount has been agreed with you, they ask your creditor to cease all charges and negotiate a different repayment schedule, the one which will be easier to manage every month. In most cases, creditors are happy to agree to the plans because they know from their experience that such plans are realistic and sustainable.
You then make a single monthly payment, all of which is distributed to your creditors on your behalf. It is important that the payment is made into your debt management plan on a monthly basis. Throughout the duration of your plan, your debt advisor should be constantly in touch with you so that you can have an experienced voice by your side in case of any issues from your creditor.
Your debt management plan must be reviewed at regular intervals to ensure that it still meets your ongoing circumstances. In case your financial situation changes, they will have the flexibility to renegotiate the payment terms on your behalf.
Purpose of Debt Management Plans
DMPs are only possible for unsecured debts. DMPs will serve as the third party that will negotiate the new terms of loan repayments between you and the lending companies.
The agency must study the overall financial situation of the debtor. Based on your income, expenditures, outstanding loans, and maybe several other factors, they should grant the most suitable and possible payment terms for you, the debtor.
Expectations from Debt Management Plans
Debtors get the luxury of making one payment per month for all pending loans. In line with its main purpose of providing a feasible solution for debtors experiencing financial difficulty, you will be paying less per month for an interest rate. This is the result of averaging the interest rates of your multiple loans.
On the other hand, the terms of the loan will be extended for as long as 30 to 60 months. Being under a debt management program will also reflect on your credit record, which might affect your eligibility to apply for other credit in the future. Apart from this, as long as you are consistent in paying the new monthly dues arranged through a DMP, your chances of being considered for future loans shall be much higher.
How does Debt Management Plans Work?
Debt Management Plans work to lower the total due balance and consolidate all debts into one affordable monthly payment. This plan is most beneficial to those who cannot make payments each month because of late fees or higher rates of interest. Negotiating with creditors can get you better rates of interest and terms. With optimum information, you can forget about the harassing calls from creditors and concentrate on finding the means of paying your debts.
Advantages of a Debt Management Plan
- Reduction in Your Debt Payments: We can deal with the lenders to reduce the amount you have to pay monthly. This can work for unsecured debts from credit cards or personal loans.
- Reduction or Elimination of Your Interests: Instead of increased monthly, you will have enough to start reducing your debts.
- Reduction of Late Fees: Some creditors offer the benefits for over the limit fees and membership costs, but they are not guaranteed. In some cases, we can help you reduce such late fees.
- Single Payment Each Month: All your payments will be merged together into one single account. This will make it easier for you to avoid late payments or cross the limit.
- Improved Credit Score and Credit History: When you start paying your debts consistently, this will happen on its own. Lenders will see you on a better perspective.
Tips for a Successful DMP (Debt Management Plan)
- It is vital to only accept a debt elimination plan that you can afford to pay. It is not recommended to get those plans that have high monthly rates of payment since it will still become a burden on your part, only adding to your financial problems instead of solving your debt problems.
- It is essential to transact every debt reduction plan in writing. Always make it a point to have everything documented in black and white. Having a debt management contract is one of the essentials to get started in managing your debts.
- Once you undergo any debt management scheme or plan, always inform your creditors formally in writing about your desire to settle your debts with them through such scheme or plan.
- Always make regular payments. This will help you avoid paying any late fees or over the limit fees that will greatly affect your credit standing and financial status.
- It is very important to ensure that the fees that you will be paying are not high. This is not an ignored fact, since if the fees will still be higher then it will necessarily overcome your point of receiving a debt management plan.
- Do your research in order to find out the fees that will be charged to you by your debt management company. These fees include application fees, enrollment fees, consultation fees and other similar fees.