Debt Management Plans- What You Need To Know

A popular and successful debt relief option, debt management plans (DMP) generally go hand-in-hand with credit counseling. With the number of people still struggling to get their finances back on track remaining high, there is plenty of demand for these types of services. To meet this demand, many companies provide credit counseling and assistance in managing debt, however not all credit counseling companies are operating on the up-and-up. The Federal Trade Commission as well as some state Attorney General offices have taken legal action toward credit counseling companies that deceive consumers. To avoid adding to your debt problems, you must be an active player in your debt management plan.  Consider the following tips to get the best results.

• Find the right company- Nonprofit organizations have a legal obligation to provide counseling and education services from certified and trained counselors. These individuals understand common problems with credit, debt, budgeting and managing money. It is your responsibility to carefully research any company before moving forward as several credit counseling companies have been sued in the past for lying about their nonprofit status. Check with the Better Business Bureau and other online sources to see if clients who have already worked with the company experienced problems. By weeding out the less reputable companies you increase your chances of success.

• Confirm DMP with creditors- Once you find the right company and set up a DMP, take the time to contact each of your creditors before making your first payment to confirm they have agreed to the DMP. This provides added security that your monthly payment is going to be accepted by your creditors. This is a two step process, the first confirming the DMP has been set up and approved and then following up throughout the process to ensure the creditors are receiving your payments from the credit counseling company.

• Make timely payments- In order for your DMP to work properly, you must hold up your end of the agreement as well. Credit counseling companies not only educate and guide clients in money management, they also communicate and negotiate with creditors to secure more favorable terms. This can include lower interest rates or waived penalties and fees. If you fail to make your payment on time, this can result in increased interest rates and additional fees or penalties that will increase the amount owed, versus reduce your debt balances.

Credit counseling and debt management plans have proven to be a successful combination to reduce debt. Finding a reputable company, following up with creditors and making timely payments will allow you to address your debt and regain control over your personal finances. As with all debt relief options, consumers are encouraged to explore and research all debt elimination methods to find the one that will work for your individual financial situation.