Debt Management Guide to Success
A consumer debt management plan is a worthy strategy to consider if you're struggling to make minimum payments on your unsecured debts. So if you're someone with mounting credit and department store card balances, medical bills, or other unsecured accounts in collection, read on.
Consumer debt management plans consolidate your financial obligations into a single monthly payment that you remit to a debt management agency. Your payment is then divided proportionally and distributed to your creditors by the agency. A good company will immediately begin to negotiate, on your behalf, with your creditors to attain several benefits. These benefits may include lower interest rates, waived late and over-the-limit fees, and reduced monthly payments. At the end of the plan's term, you will have paid off your debt in full and gained financial independence through a long-term strategy designed to save you from filing for bankruptcy.
Sounds simple enough, right? It certainly can be with proper planning. If crafted the right way, broken down into achievable goals and followed precisely, the right consumer debt management plan can help you manage your money and get out of debt successfully. Here's how:
- Choose the most credible debt management agency. Reputation matters. Select a partner that has been in business long enough (minimally three years) to have built a solid reputation with other consumers, the Better Business Bureau (BBB), and creditors. Also, talk to friends, family members and co-workers for recommendations, and shop around for the best deal with a top rated debt management provider you can trust. Compare each provider's service offerings, fee structures, etc., to identify which agency will offer you the lowest monthly payment and fastest payoff period for the lowest fee.
- Don't be sold on a "one-solution-fits-all" model. Select a provider that offers multiple plan options and a reasonable fee structure. Also, if you wonder what bills you can put on debt management, the answer is simple. Include all of your unsecured and credit card accounts on the plan from the beginning, so you're not tempted to add new debt. This approach will help to ensure that your debt management credit counselor guides you to the right plan. Then, once you're content with a plan that fits your unique financial situation, review your agreement carefully and keep it in a safe place for easy access. Be sure you understand the plan's structure, associated fee schedule and requirements.
- Inform your creditors about your plan participation and new payment date immediately. Collection activity against you should stop quickly once you let creditors know that you have enrolled in a debt management plan. It is critical to let creditors know your new payment date and then adhere to your new deadline (if you selected a new date). Remember that creditors expect payment every 30 days, so select a date within that window. Also, if you find that you have additional money each month, simply increase your payment amount for that period.
- Monitor your statements carefully and keep your debt management provider in the loop. Most creditors offer 24-hour account access, online or by phone, so there is no excuse to be out-of-touch with your balances. Additionally, mark a date and time in your calendar to review your statements each month. Also, communicate with your debt management agency when one of your accounts has been paid in full, and make sure their statements and your creditors' statements make sense. Address any discrepancies immediately.
- Be patient. Most debt management plans take an average 60 months to complete, so the saying "patience is a virtue" certainly rings true. Just know that the average payoff time is 25 years for a consumer who doesn't enroll in such a plan, so stick with it.
- Just like the Boy Scout motto says, "Be Prepared." You never know when an unexpected or unplanned expense may present itself (e.g., medical bills or a broken-down car). Therefore, try to set aside a small amount of money each month, so you can handle life's little emergencies without jeopardizing payments toward your debt management plan.
- Stay out of debt for good. When you're tackling your debt, knowledge is one of your best allies. Use the knowledge you gain through the process of completing your plan and continue practicing these techniques. Also, your chosen agency should offer free debt management tools, calculators and ongoing support. Use them!
Your ultimate goal with any debt management plan should be to repay your debt, and take advantage of any educational resources and certified counselors so you can acquire the money management skills you need to get out of debt the smart way. When you take the time to thoughtfully assess your current financial position, be realistic about what you can afford to pay each month and stick to the plan, you're bound to succeed. Debt management can indeed work for you.