Gain Financial Freedom with a Debt Management Plan
If you are one of the many people today who live paycheck to paycheck, and you feel like you are always borrowing from Peter to pay Paul, you should consider obtaining help from debt management consultants or a credit counselor program.
How Debt Management Can Help You
Reputable debt management consultants will advise on how to manage your debts, help devise a budget or plan, and provide you with free financial education materials. Certified and highly trained in debt management and consumer credit, these specialists will discuss how you can improve your specific financial situation. Debt counselors will have an initial session with you to develop a uniquely personalized repayment plan to find solutions for your financial problems, with the long-term goal of living debt-free.
Many Americans have turned to credit counseling services and debt management plan providers to get themselves out of debt. The National Foundation for Credit Counseling (NFCC) has been counseling Americans through its agencies with 115 members in 1,000 nationwide offices. Many families who have carried more debt than their income have either enrolled in one of the debt management plans or simply asked for help from the NFCC.
Finding the Right Debt Counseling for You – And Avoiding the Scams
Many companies that offer credit counseling and debt help management plans are considered nonprofit organizations - however, this does not mean that they are free or even affordable. In fact, some of these service providers are outright scams. You have to be careful, ask questions, and investigate the company. It is your financial well being that is at stake - be precise and diligent in coming to a conclusion regarding the different debt management programs.
One surefire sign that a debt management program is looking to profit from you, rather than help you, is their fee structure. For example, if you are late in making a payment, the less than reputable debt management counselors will take your entire payment as their “fee,” with none of your money going towards paying your actual debt. Others will take your entire first month payment as their fee, paying nothing to your creditors.
How Debt Management Counseling Programs Work
Once you have enrolled in a reputable debt management program, you will need to deposit a fixed amount of money every month. The program operators then pay each of your creditors the amount that has been negotiated. When you sign up with a debt management plan, the plan will last three to eight years until the payoff date, depend on your debt load.
Your consultant will contact the creditors and obtain a reduction of interest rates, as well as negotiate to waive any late fees. Most of these repayment organizations already have a relationship with the creditors, and they know how each creditor will proceed. If you tried to negotiate your own case, it is probable that you would not accomplish as much as the specialists could.
A Potential Pitfall of Debt Management Plans
Even though the credit bureaus state that association with a debt help management programs does not affect your credit score, the existence of such a plan is still listed. Therefore, all your potential lenders and employers in the future will see that you obtained help for your debt management.
Lenders tend to frown upon the presence of debt management programs, as it is a sign that you have had financial difficulties - in the lenders’ eyes, these financial troubles are red flags when it comes to your overall risk as a borrower. According to the traditional mortgage underwriting guidelines, some lenders actually treat the presence of debt help management the same as a Chapter 13 bankruptcy filing.
There are many debt help management plans and credit counseling services from which to choose. It is important to speak with several different debt management counselors and ask plenty of questions about their fees and processes before making the right decision for your financial situation. It is possible to live debt free, and for many financial circumstances, a program that helps you manage your debt is the right key to long-term freedom.
