Debt Management Programs: How They Can Help You Get Out of Debt

Are you struggling to pay off your high-interest rate credit card debt? A debt management program (DMP) may be the answer. It's a payment plan designed to help you eliminate debt and reduce your interest rate by half or more. Through a credit counseling agency, you can create a budget and find a monthly payment that fits your needs. A DMP can help you consolidate several debts into one single payment.

Your credit rating may take a hit initially, as accounts are closed and you have less credit available. However, enrollment in a debt management plan is supposed to be treated as neutral in terms of credit rating. In the long run, as you gain control of your finances, your credit rating is likely to improve. If you think a DMP is the best option for debt relief, start by finding a reputable credit counseling agency.

Once you find a credit counselor you feel comfortable with, they will review your finances and help you create a budget, as well as decide if a debt management plan is right for you. Your debt management program should be completed in 36 to 60 months and reduce your monthly payments and interest rates by 30 to 50 percent. If all three parties work together responsibly, the program should eliminate all debts within 3 to 5 years. Plus, when you complete the program, credit card companies are often eager to renew their relationship with you.

Utilities, rent, and cell phone services are other types of unsecured debt that could be part of a DMP. The great thing about DMPs is that you only make one payment per month for your debt repayment plan, instead of making numerous payments with numerous installments. This powerful tool can leave most users debt-free (and fully paid) in less than five years. When it comes time to close the program, contact your bank and stop payments to the agency serving your debt management program.

Accounts included in a DMP may appear as paid through a debt management plan on your credit report, but this should disappear once the account has been liquidated. During your debt management program, Clearpoint certified counselors are available to help you with any problems or concerns that arise. You can save some money with a debt settlement, but it will negatively affect your credit rating since you haven't met your entire obligation. If you're sending money to creditors every month but not making much progress on paying off your debt, a debt management plan can help.

Evan Turomsha
Evan Turomsha

Award-winning twitter buff. Amateur web ninja. Total food maven. Typical travel fanatic. Certified beer geek.

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