For those that find themselves in a significant amount of debt, it may be possible to reduce the financial strain through a debt management plan. This is simply a formal agreement between a creditor and debtor that addresses the terms of the debt. The plans help to reduce outstanding debt over time with the end goal of helping the borrower regain control of finances. The process used can help to secure a lower interest rate on the loan, increase the repayment terms, or reduce the amount of debt altogether.
How it Works:
There are many companies which have debit management plans in place. The first step in the process is setting up an initial appointment with a counselor. This financial expert will spend time looking through personal finances and budget. The counselor can then provide expert advice on how to reduce debt and control spending. They will also work with clients to develop a budget customized to the unique situation. If needed, a debt management plan will then be enacted.
Not every type of debt is included in this plan. Online unsecured debt may be included while secured debt like mortgages, auto loans, and student loans are not included. With this plan, there are three parties involved: the counselor, the client, and the creditor. Each person is expected to play their part throughout the process.
The counselor plays one of the most important role in this process. They work with clients to create a workable budget and may also provide education tools or resources to help clients stick to these budgets. They serve as an intermediary between the lender and the client, speaking to both parties throughout the process. They also will consolidate debt so that there is only one monthly payment. The counselor then accepts a monthly payment from clients and is responsible for disbursing these funds to creditors. Throughout this process, they serve as an ongoing resource and support system.
The client also plays an important role in a debt management plan. They are responsible for taking advantage of the financial education and counseling provided. They also need to make sure that the monthly payment is made on time and in the amount specified. Clients should also not seek new credit while on a debt management plan and be sure to read all statements as well as the progress report on a monthly basis to keep track of their repayment.
Finding Debt Management Plans:
While many companies offer a debt management plan, it’s important to find one that works well with clients to offer significant benefits and service. One company with a well-known history is thedebtbureau.org. They serve as an immediate and long-term resource to clients and employ specialists in a variety of financial areas to ensure realistic debt solutions.
When it seems like debt is out of hand, it’s probably time to turn to a debt management plan for expert assistance. Use this advice to learn more about the steps required to use this process and how to go about finding a company that provides assistance.