If you are falling behind on your creditor payments and receiving collection calls, a debt management plan might be a good option for you. Member agencies who provide education, credit and debt counseling services can help. Although you may find it hard to take that first step and contact a counselor, it is a good step to take. You are not alone, millions of Americans are in financial trouble and more fall into this difficult situation every day. As a result of the rising high costs of food and energy, decreased home values and the credit squeeze caused by the past recession, making ends meet continues to be a challenge for many. A properly structured debt management plan could be your way out of debt.
Our member agencies' certified credit counselors will review your entire financial situation and help you to prepare a detailed budget which will list all of your income, expenses and debt. They will help you find an option that is right for you. If a debt management plan is a good option, they will structure a plan to allow you to repay your creditors with a payment that works within your budget. Best of all, they will consolidate all of your debt payments into just one payment per month on the day of your choice. All members agencies are 501(c) 3 non-profit entities. Agencies are accredited by either ISO 9001 (International Standards Organization) or the Council on Accreditation and abide by the best practices and Code of Standards of the Financial Counseling Association of America (FCAA).
Your debt management plan could be the first step towards financial freedom. All member agencies also provide you the educational tools you need to plam and prevent credit problems in the future. Their websites are packed with resources and useful information on debt management plans, how to budget, and consumer rights.
If you are falling behind, don't wait. Speak to a credit counselor now and ask about debt management and whether it's the right solution for you today!
Frequently Asked Questions
Who is a good candidate for a Debt Management Plan?
A good candidate for a Debt Management Plan has a high debt to income ratio and is having trouble making minimum payments. They may have fallen behind on their payments and cannot come up with the current minimum payment including late payment fees. Their budget shows that they can afford to make the DMP payment which will help them to pay off the debt in a much shorter period of time than they could on their own, if creditors waive penalties and lower interest rates. They are committed to becoming debt free.
Will a Debt Management Plan hurt my credit?
Significant debt and accounts already in collection cause most clients joing a DMP to start off with poor credit. Steady repaymnt through a DMP will usually result in a gradual improvement of a client's credit score. After a client enrolls in a a DMP, most creditors will show their acounts as current. This is not true for all creditors however, so be sure to ask how they report DMP participation to the credit bureaus if you are concerned.
Per Fair Isaac & Company, the company that created the FICO scoring system formula (a system for quantifying a consumer's credit worthiness), the formula ignores any reference to enrollment in a Debt Management Program.
What is the cost of a Debt Management Plan?
If you choose to enter a DMP, you will be charged a monthly fee depending on your state of residence. Agencies' fees for Debt Management Programs are minimal and must meet all State fee cap guidelines.
How long will it take for me to pay my debts via a DMP?
Your payoff time is dependent on the amount of your outstanding debt and your ability ro make regular monthly payments. Most clients enrolled in a DMP are out of debt in less than 48 months. The maximum time you can be on the program is 60 months.
Can I obtain new credit after completing a DMP?
For the majority of the participants the answer is yes. However, credit grantors using risk-based pricing may charge higher rates until your credit improves.
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Information courtesy of Member Agency American Financial Solutions