Debt Management
What is a Debt Management
Program?
The debt management programs ask for a one time enrollment fee for enrolling
you into the program. They base the enrollment fee on the amount of debt you
have and your hardship that you have been through. The fees range from
$400-$1500, compared to other industries, debt management has some of the most
affordable enrollment fees. Debt settlement and other companies usually charge
14%-18% of the balances that you owe.
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One affordable monthly payment (typically lower)
Reduced payment period (close to half the time)
Over the limit and late fees waived (after 90 days in a program)
Bring past due accounts current (after 90 days in a program)
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A debt management program will help you get out of credit card debt and some
consumer debt by lowering your monthly payments and your interest rates so you
can pay off your unsecured credit card and consumer debt balances within a
reasonable amount of time.
Debt management programs are NOT like debt
settlements. You are not putting your money into a trust account and you are
not asked to stop making payments. With a debt management program you will be
paying your creditors with an affordable monthly payment until your balances are
paid in full.
Debt management programs are quickly becoming an industry standard and will soon
be recommended first before a person looks into bankruptcy.
They are required to give you financial help in three areas:
1. Help with your interest rates
2. Help lower your monthly out of pocket expenses
3. Give you savings on a daily basis
The creditors are involved in these debt management programs. The interest rates
are set and fixed nationwide with any company that you go with. The creditors
offer these low interest rates to the enrollment companies because they have an
established relationship with the creditors.
One of the most important things that a debt management program will do for you
is get you out of daily interest charges and put your accounts on simple
interest. Simple interest only charges you interest once a month as opposed to
every single day. The majority of your savings will come from the daily interest
that converts to simple fixed interest.
Using a debt management program to get out of credit card debt should not have
any negative impact on your credit score. The only way there will be a negative
impact is if you make your payments late or if you take an action that would
normally lead to a lower credit score, for example; making a partial payment can
be regarded as negative.
Once you are finished with a program you may reactivate your accounts or open
new ones. Any accounts that you include in a debt management program will be
closed during your program so that your credit rating does not take a big hit.
You may leave an account out of the program for emergency purposes and you may
also add an account to your existing program at any time. For example, if you
had a credit card with a very low introductory rate you would not want to enroll
that account into the program until the rate on that card increases and at that
point you can put it into the program at no charge and get the rate lowered and
fixed.
A debt management program is not all about trimming interest rates - the real
savings and benefits of these programs is with the daily interest converted into
simple fixed interest. Back to Debt
Management >
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