Debt Management Programs

"Debt Management Programs are not the same as Credit Counseling."

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There is no one answer to debt management and each person’s financial situation is unique, requiring an individualized plan.

Consider signing on for one of these programs only after a certified credit counselor has spent time thoroughly reviewing your debt situation.

A reputable credit counseling organization will help you create a budget and teach you money management skills.

How does it work?

Debt management companies and credit counselors can help individuals by contacting all of their unsecured creditors and notifying them that the client has enrolled into a debt management program.

Usually, credit counselors can stop late fees and other penalty charges, reduce or stop interest charges, lower the required monthly payments and re-age accounts to bring them current.

When you enroll in a Debt Management Program, you write a monthly check to the credit counseling agency and the agency pays your creditors.

All the correspondence from creditors regarding past due accounts are directed to the credit counselors. It means you'll get fewer or no collection calls and letters from creditors. The plan usually lasts 3-4 years.

Realizing that the individual is in financial problems and is seeking professional help, most creditors will work with a debt management company and offer some form of relief. The creditors realize that if they don't help you out, you may file bankruptcy and they will likely collect nothing.

Debt management programs only work with unsecured debts. Credit counselors do not contact secured creditors, utilities, or insurance companies.

How does it affect your credit?

Unfortunately, if you enter a debt management or debt repayment service, it does go on your credit report. Because CCCS contacts your creditors to work out better terms for you, a comment will show on your credit report stating you’re paying through a credit counseling agency until the account is paid in full.

It shouldn’t hurt your credit score but some debt management programs prohibit consumers for applying for new credit while participating in the program. Also, creditors may see you’re participating and decide you have all the debt you can handle.

Still, it's better to go through debt management than bankruptcy because future employers and credit grantors look upon the effort to repay far more favorably than a default though bankruptcy.

How to choose?

Take a good look at your financial situation before deciding on a debt management plan. If you’re current on your bills, you may want to negotiate lower payments and interest rates on your own.

Lenders and debt consolidation companies can supply you with free information about their services. So, don’t be afraid to ask and make sure the company you choose has:

  • Certified Credit Counselors through the NFCC (National Foundation for Credit Counseling),
  • your best interests in mind (Non Profit Work),
  • a strong commitment to your confidentiality.
  • Quotes on Debt and Money.

    Lack of money is the root of all evil. - George Bernard Shaw quote.

    Don't stay in bed, unless you can make money in bed. - George Burns quote.

    I'm living so far beyond my income that we may almost be said to be living apart. - E E Cummings quote.

    Some debts are fun when you are acquiring them, but none are fun when you set about retiring them. - Ogden Nash quote.

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