wealtharticles-a_way_towards_a_healthy_debt_free

A Way Towards A Healthy Debt Free Life

A Debt Management Plan or a Debt Management Program (DMP) is often a sound solution when you find yourself seriously in debt and with nowhere else to turn. But what is a Debt Management Plan? A DMP is a program where the credit counseling or debt management agency makes your many monthly payments more manageable by negotiating with your creditors, attempting to possibly lower or freeze your interest rates and waive your late fees. With a DMP, you make only a single monthly payment, which the agency then disburses across all your creditors.

However, one must be aware that there are many debt management programs that are unreliable, or charge unreasonable fees and some that are even fraudulent. The main purpose of a DMP is to get you out of debt and avoid bankruptcy. It is important to research the agency before you enroll in their debt management program.

Here are some ways to get the most out of your DMP:

·Begin with credit counseling. Any sound DMP will always offer credit counseling before requiring you to commit to any program. Trained credit counselors should help you make a realistic budget and help you explore all other options before signing you up on a DMP.

·Ensure that all information given is accurate and comprehensive. The counselor will need all your current credit card and loan statements before a monthly payment program is worked out. Do not trust any agency that gives you a quote without asking for details of you current financial liabilities. Also, make sure that this information will not be shared with others except the creditors involved in your plan.

·Ask how your creditors will receive their payments. Make sure your creditors receive their payment on time and within the correct billing cycle. Know how you can track the payments made. You should either receive a monthly statement or be able to look up your account online.

·Do not expect miracles. Reputable debt management agencies have considerable negotiating power with your lenders and will be able to help you in many ways. There is never any guarantee, though, that the negotiation will always be successful. Lenders are not forced to accept reduced repayments or altered terms.

·Do not stop making payments. Continue doing so until you are sure your creditors have accepted all terms of the DMP and you are aware of the payment cycle. If you miss payments in the meantime, you may incur additional charges and the creditors may back out of the agreement, as a result.

·Don't forget your other bills. A DMP will only deal with unsecured debts such as credit cards and personal loans and not mortgages or car payments. Make sure you understand exactly which debts are being managed by the DMP, and be sure to keep up with your other bills.

·Never miss your DMP payments. For a DMP to succeed, you must make regular payments and always on time. If you are not likely to make a payment on time, contact the DMP agency immediately (and before the payment due date), to let them know.

·Avoid building up any more debt or applying for new loans. Your creditors have the right to check your credit report. If they find you have applied for more credit, they can back out of the DMP.

·Most importantly, make sure you can actually make the negotiated monthly DMP payments. If you don't think this is possible, you must look at other options for help. It will be counterproductive to enroll in a program only to default on your payments.

To learn more about the benefits of a debt management plan visit http://www.endyourdebt.org/debt-management-benefits.aspx
Tracy East is the Community Outreach Coordinator for Consumer Education Services Inc. (CESI) located in Raleigh NC- a non-profit credit counseling agency that specializes in equipping consumers with the personal financial tools and educational programs to provide solutions for their financial situations. Tracy is a certified Personal Finance Counselor through the Center for Financial Certifications in Portland, ME and has a degree in Education and Family Science.