With this option, credit debt management companies, sometimes referred to as a credit counseling agencies, work with debtors to secure a lower interest rate that a debtor would be able to receive on their own. The reason these credit card debt management companies can secure these lower rates is because they maintain pre-arranged agreements with credit card companies.
As part of the consumer debt management process, the debt management consolidation agency will enroll consumers in a debt management plan (DMP).
A credit card debt management program generally takes about 5 years to complete. It can be a good debt relief management option for you if you are able to make the required commitment to a debt management consolidation plan.
When do You Need Debt Management?
Debt management services can help you manage credit card debt. However, if you are struggling to just make minimum payments, debt management services may not be for you as you might need more than just a reduced interest rate. But if you can commit to the debt management plan and pay the required monthly amount, debt management consolidation could be a good option for you.
The payments in a debt relief management program can be significant. It is important to be aware that:
- Sticking with consumer debt management requires both responsibility and commitment. Debt management consolidation plans generally last 5 years so you will need to commit to your debt management solutions plan and make the required monthly payments.
- With a debt relief management plan, your principal balance will not be reduced.
- Your required monthly payment in a consumer debt management plan will be only slightly lower than the regular minimum payment
- During your credit debt management plan, you’ll be unable to secure additional credit, including a car or home loan.
- You will most likely need to make some lifestyle changes in order to be successful with your debt management solutions program.
- There are monthly fees involved in being in a plan to manage credit card debt. These fees can add up over 5 years.
- Issues you encounter during the credit card debt management process, such as medical issues, divorce, or losing a job, will make it challenging to meet monthly payments and other expenses.
How Debt Management Services can Help You
If you have a reliable income and aren’t completely overwhelmed with credit card debt, this type of debt management solutions plan could be your best option to help manage credit card debt.
How Debt Management Solutions can Help You
It can help you by lowering your payments. This is done through a credit debt management agency which will negotiate a lower rate, or “concession rate,” with your credit card companies.
Using a debt management consolidation program also has a smaller impact on your credit score than other options. If the debt management solutions program requires you to close credit accounts, that will make your credit score go down. However, the effects of this type of credit debt management are not nearly as negative as other debt relief options.
Because you will be enrolled in a debt management plan, you will also receive some financial education. These classes can help you learn better budgeting and financial management skills, enabling you to better manage credit card debt in the future.
Another way that credit debt management services can help you is that it stops harassment and collection calls as long as you are in the consumer debt management program and continue to pay your bills.
Do Your Homework: Research the Consumer Debt Management Agency
While a credit debt management companies can help you manage credit card debt, it is important to do a little homework. It is imperative to make the right choice for you when it comes to credit card debt management.
Before making a choice on how to resolve accumulated credit card debt, you should thoroughly research not only your different options, but also the debt management agency itself. A few things to take into consideration when selecting the right debt management services for you include how wide the range of services and individualization the debt relief management agency offers. You want a credit card debt management company that will take the time to analyze your personal financial situation and offer you a choice of plans that would work best for your own debt relief management. You also should look at the history, background and success of the consumer debt management agency. It is also important to ask a debt management solutions agency what their fees are so you know those up front.
Debt Relief Management Terms
Going through a debt management consolidation program requires diligence and commitment. You’ll also need to know a few terms related specifically to credit card debt management.
- Debt Settlement: It is important to know that there is a difference between debt management and debt settlement. A credit debt management plan lowers your interest rate while a debt settlement lowers your principal balance.
- Concession Rate: the term used to describe the low interest rate that a debt management services is able to secure on behalf of debtors from credit card companies.
- Debt Management Plan (DMP): a class a consumer is enrolled in as part of the consumer debt management process. Under the terms of the credit card debt management plan, the debt relief management agency will collect a monthly fee from the consumer. It will also collect a “fair share” payment from credit card companies.
- Fair Share Payments: revenue that the debt management services agency earns from credit card companies.