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More about managing debt What is a Debt Management Plan? How can it help?A debt management plan is NOT a loan. In a typical program, debt management companies work with creditors on your behalf to reduce your monthly payment and interest rates on your debt and waive or reduce any penalties. The parties agree on an affordable payment schedule that allows 3-to-5 years to pay off your debt.A debt management plan is part of the package of that are designed to help people regain control of their finances while reducing unsecured debts. An unsecured debt is one that is not backed by collateral, and includes credit cards, and.It is one of several ways you can take control of your debt and reduces the number of payments you make each month and can save you money in interest and fees.Those who enroll make monthly deposits with a credit counseling organization, which then is used to pay the debts according to a predetermined payment schedule developed by the counselor and creditors.

Your monthly payment is tailored to what the customer can afford, and you know before agreeing to take part in the program what that monthly amount is. An analysis of household income vs. Expenditures determines the monthly payment. Advantages of a Debt Management Plan. Offers without a loan.

It will help you stay more organized and punctual with your bills and payments. It creates a realistic monthly budget with a financial goal.

Making regular and timely payments can improve your credit report and credit score over time. Creditors or collectors have incentive to stop calling.Considering a Debt Management PlanBefore you sign up for a debt management plan, choose a to help you with the process.

Many of these organizations are nonprofit and may offer free of charge, while others charge fees.The Federal Trade Commission (FTC) recommends finding a reputable credit counseling organization that uses certified counselors trained in consumer credit and debt management. They can help manage debt as well as develop a practical budget. Debt.org offers a team of who can help as well.It’s also vital to check with the local consumer protection agency, the Better Business Bureau and the state Attorney General’s office to ensure there haven’t been any consumer complaints and the organization is licensed.Beware of hidden fees, scams and fraudulent organizations. Look up a company’s record with the Better Business Bureau to check its track record. Once you find a credit counselor with whom you’re comfortable, he or she will review your finances and help you, as well as help you decide whether a debt management plan is right for you. Some points to remember when enrolling in a DMP:.

It can take 36 to 60 months to repay debts using a DMP. The organization may restrict the consumer from using or applying for additional credit while enrolled in the plan. If DMP payments are late, the consumer may lose progress on decreasing the debt and lowered interest rate or fees.

You may qualify for lower interest rates on your debt and a lower monthly payment.Signing up for a Debt Management PlanIf you decide a debt management plan is right for you, your credit counselor can help you enroll. He or she will work with your creditors to negotiate interest rates and to come up with a payment schedule, which you will review and approve before beginning the plan.Once it is determined how much money is left after basic living costs like rent, utility bills, secured loans and living expenses are paid, the remaining amount can be divided among creditors.Then, you’ll make a deposit monthly to your credit counseling organization. In turn, the organization will distribute the money to your creditors according to the agreed-upon payment schedule.Participating in a debt management plan will cost you very little. After counseling sessions, you should only pay a small one-time set-up fee and a small monthly maintenance fee. Avoid any credit counseling organization that requires an application fee, membership fee, upfront fee or per-creditor fee. Staff WriterBill “No Pay” Fay has lived a meager financial existence his entire life.

He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at. Sources. Block, S.

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