Debt Management Program

Written by admin on April 8th, 2011

There are times when a DIY approach to personal finances won’t work. Budgeting and juggling monthly bills is tough even without massive debt, but when the time comes that it is too overwhelming, it’s time to talk with a debt management program company.

Essentially, a company takes over a consumer’s debt and starts to manage it for him or her. A debt management program works very differently from debt consolidation because there is no loan involved. It also works differently in that as a part of the debt management program, principle balances with creditors are renegotiated and reduced. Resolution companies, who specialize in debt management programs, have expert negotiators who work with creditors to lay out a new plan of repayment. In practice, the consumer stops paying anything toward the debts and instead puts the money into an insured account. Once enough money has amassed, they go to work talking with creditors. As new balances are agreed upon, they are paid from the fund.

At the beginning of a debt management program, credit ratings will take a hit since bills will be over due. There is a certain trade off to be made. By not paying the bills, it shows creditors that the consumer is in financial trouble and might declare bankruptcy. Of course, no creditor wants that. They might receive nothing toward their balances if that happens. The upside to taking the credit rating hit is that most debt management plans can be completed in twelve to thirty six months, and that means the consumer can start rebuilding good credit more quickly. The reality also remains that if a consumer is in enough financial trouble to consider debt management, their credit rating is likely already in deep trouble.

The best help, aside from becoming debt free, that a debt management program can offer is to help a consumer develop better financial habits. It wasn’t clear thinking and planning that created the problem, so working toward better financial sense should also be a goal.

There are many debt management companies around today, and the key to selecting the right one is to do research. With so much information available online, it is easy to find out more about a company through links and through customer testimonials. Since it is all about financial future, the consumer should feel confident that his or her choice is the best possible one.

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