The basics of the management plan lay in the two-side agreement between the person and his creditors about the monthly payments. These plans are usually created by the managers of debt consolidation companies which also known as debt plan operators or providers. They will perform the negotiation process with your creditors and make your total payments as low as possible.
The debt management plan is usually the agreement made between the creditor and the debtor mostly on debtor’s behalf. The interest rated and the total sum is lowered so that the person is able to regain control over the finances.
The amount fixed on the plan is totally realistic since it’s calculated according to the financial state of the person. The test of your incomes and spends will let the manager to figure out, how much money you can give off for payments. This amount will not include any sums coming into the household. This is the perfect guarantee the person will not suffer from the lack of costs.
Here are the main states of the program:
- you pay as much as you can afford to;
- the received sum is shared wisely among your creditors;
- you promise to repay the stated sum in full;
- after stating the debt management the sums are changed into lesser ones;
- some interest rates and sums might appear to be frozen;
- sometimes creditors might not agree to the debt consolidation plan at all, in this case they can go on calling you and may even take you to the court;
- debt management can be performed on the unsecured debts only;
- some debt consolidation companies ask for the significant fee as the payment for their help, you can ask for this before getting involved in the process.
The advantages the debt plan offers
Here is the list of the advantages you can get with the debt management plan:
- you make one regular payment instead of multiple ones, which results the perfect control over your finances;
- your interest rates might be frozen, so that the total sum of payments will appear to be lower;
- your creditors will most likely never contact you again, as they will chat with the debt consolidation company instead;
- after you pay off the planned sum, your unsecured debts will be cleared.
The disadvantages the debt plan obtains
The debt management plan also obtains the set of disadvantages:
- you still have to pay off the debts, unlike the bankruptcy case when they’re just written off;
- some creditors might just not want to get involved in the debt plan and go on demanding the full debt from you;
- the secured debts are not covered by the offered management plan and shall be paid off in usual matter.
How can I be sure to afford the plan of the debt management?
You can take advantage of the program only in case you have some money left each month for payments. This will allow you to plan the budget and pay off the fixed sum each month after all your monthly payments for the living are made. The household amount is never included in the sum of possible credit payments.
If the sum left after the household payments is really small or there’s nothing left at all, the debt management is not your option and you shall look for some other ways.
How can I be sure it’s the right time to resort to the debt management plan?
All people have different situations, which mean it might be hard to detect the correct time for getting involved into the debt consolidation. Here are some hints for you to make up your mind about looking for the debt relief:
1. The balance of your debt-to-income is 42% or more
This usually is the clear sign that your debts are more than you can handle. If your ratio is lower than 40%, still the danger is close and one single unforeseen expense can lead you to the debt trap. On the other hand if your ratio is over 50% call to the local debt consolidation company right now.
2. You hardly can afford OR and usually are late with payments since you’re waiting for the money to come
The late payments affect the score of your credit, which means you might fail to pay off all the needed credit all at once. There’s no need to wait until your account is sent to the collectors or is delinquent. Use your time to weight your chances in the experienced debt consolidation company.
3. You go on paying monthly minimums; still the balance on your credit card doesn’t go
This is the clear sign that the interest rates are too high or the account balances aren’t appropriate. Before you get in trouble it’s the right time to ask for help.
How to choose the perfect debt plan
The best way to choose the debt management plan.
At the time of choosing the debt management plan provider, put attention to the following features:
- the chosen provider obtains the license of Office of Fair Trading (OTF);
- the provider discusses all the possible options for your case;
- the costs are voiced out from the very start and the person paying them is defined;
- you do know the consequences of stopping the plan due to your miss of payment date;
- you’ve turned to other providers to compare the possible deals.
The terms of the plan
When the plan is defined, before starting it, take your time to clear the terms and conditions, such as:
- how long and how much you’re going to pay;
- the circumstances under which the provider cancels the agreement etc.
For further information do not hesitate to get the free advice about your debt consolidation options. Use any suitable contact on the site contact page in order to get all your questions answered.