The credit counseling can offer the creation of the debt management plan, as well as the service of the online service of the company specializing on the debt consolidation. With its help your interest rates as well as the total sum might get significantly lowered and become bearable for your financial state. The credit counselors will also talk to your creditors in order to fix the situation.
Here we offer the visible example of how the debts can be rearranged into clear chart.
For example, John has 2 Credit Cards and 1 Personal Loan. The interest rates of each card and loan are added and divided on their quantity.
The outstanding balances are added as well to get the total amount.
With this information John can go to the debt consolidation company. There the interest rate will be reduced to the available minimum and applied to one single payment.
The payments made before the debt plan had the interest rates added to the sum and resulting the significant rising of the debt.
On the other hand the debt consolidation lets the sum stay fixed, which results the almost 6 times reduce of months’ quantity for payments. This not only makes the debt lesser but also lets the person to get free of it in appropriate time.
What bills can be included in DMP?
You can include any kinds of the unsecured debts like CC bills, medical bills and all kinds of personal loans, credits in the department store and much more.
Main benefits of the debt program
The program is usually accompanied with a lot of benefits, no matter if you’re dealing with the credit card or with the throughout management plan. Here are some of the advantages:
- the debt payment which are unsecured will be lowered;
- the interest rates and penalties might get eliminated or reduced;
- you deal with one single payment instead of the number of those;
- after some time you can get your credit score improved;
- you will get the chance to get out of the debts in defined time;
- you will not have to resort to bankruptcy;
- your financial stress will come to an end.
How to choose the debt management program that suits you mostly
1. Help yourself
This means that the more you do yourself the less work will be performed by the company. So the lesser fees you will pay. You can make your budget according to the spending and income, cut the expenses you do not really need and make the priority to some of your debts. In some cases you can contact your creditors for reducing the rates.
2. Find a qualified credit counselor
Do not think the credit counselor is the same person as the debt manager. First of all you shall turn to the credit counselor and only afterwards perform the debt management program. This way you will be helped to re-arrange your debts and credits in the best possible way.
3. Try to find the licensed agency working as non-profit, be sure they’re licensed in your state as well
Still do not think it’s enough to be sure the agency is legal one. Take your time to make a small research in order to be sure the agency is worth your trust and you can rely on the given manager.
4. Ask all the needed questions in order to understand the way the program works
You shall be familiar with all the terms like “debt consolidation”, “debt management”, “debt negotiation” etc. as these are the guarantees you understand the offered deal.
5. Make sure to give all the needed information before the quote is given
The credit counselor must ask you to provide all the credit cards that will take part in the debt consolidation. This way he will be able to fix and state out the monthly payments. These are the features to be researched in order to give you the quote:
- the statuses of your accounts;
- names of the creditors;
- balance of transfers, advances in cash and activities for large purchases;
- the amounts of the minimal payments;
- interest rates.
6. Watch the fees
The small fees like 50$ or 100$ are normal. Still bigger fees are the reason to think about. Before paying the fee get to know what it is going to cover. The best option is to get the confirmation in the written form. No “consultation” or “application” fees are required.
7. Do not agree on high monthly fees
The monthly fee shall only cover the administrative expenses, this is about 2-5$ per creditor. For any more fees get the detailed information what the company needs them for. If the total fee is over 50$ per month we advise you to change the agency.
8. Check out the way the payment will be transferred to your creditor
Some debt management companies make the payments late and get their clients into trouble with the creditors. You shall be sure the payments are received in time; the best option is to track them.
9. Define the ways the company obtains to protect your private information
You will have to share the financial information with the agency, so make sure it’s totally protected. Only the creditors you defined as the part of the plan can get the information about your financial state, but nobody else.
10. Be sure you will fulfill the requirements, and only then accept the offer
Do not take the plan with payments you cannot afford. Even if you feel like not really sure you can handle it, better do not enroll. Some of the programs do not allow you to make any more debts, so you will have to count on your own money only.
11. Write everything down
Make a contract before making the first payment. This is really important since your money get involved here. With the help of contract you will be able to see all the hidden fees and other payments.
12. The last and most important step is to cut up all the credit cards not to get into more debts.
The important tips of how to choose the optimum debt management plan
1. After you accept the debt consolidation, your agency will talk to your creditors in order to fix the most suitable strategy of paying out your debt. The result is not always successful, so you shall be ready for the worst.
2. Sometimes the creditors want to see you making the first payment to the agency before they finally sign the plan. If the agency says this to you, do not hesitate to call the creditor to make sure it’s his conditions and the money will go to his.
3. According to the word of Department of Justice since October 17, 2005, all debtors have to pass the credit counseling procedure before obtaining the craved bankruptcy status. This means you will have to pay the credits in case you have the ability to do.