Many Americans are in debt, and many are struggling to make payments. Analysis and reports from The Urban Institute indicate that up to 71 million Americas had pending debts in collection in 2017. Today, approximately 28 percent of Americans have at least one unpaid debt in collection.
If you’re struggling to manage payments on loans, credit, and store cards, a debt management program might be the perfect option. This article will guide you on everything you need to know, including your responsibilities in a debt management program.
What is a Debt Management Program?
A debt management program is a strategic plan to eliminate high-interest, unsecured debt s such as medical and credit cards. The plan allows you to eliminate your rates at an affordable rate without having to take a bank loan. Generally, the plan reduces your credit card interest to approximately 8%, making monthly payments much more affordable. This way, you can clear your debt in about 3 to 5 years.
The credit management agents will analyze your income and expenditure, helping you to create a practical household plan. The custom budget includes a monthly payment personalized to reasonable amounts. Your agents will then present the credit card relief plan to your credit card companies for evaluation and approval.
Some of the debts you can eliminate with a debt management program include:
- Credit card
- Personal loans
- Overdrafts
- Payday loans
- Money borrowed from friends and relatives
- Bank or building society loans
- Home credit, catalog, or in-store credit cards
Here are some of the debts you cannot clear off with a debt management plan:
- Tax- Council tax, income tax
- Court fines
- Child support and maintenance
- Rent, mortgage, among other loans secured against your home
Your Role in Debt Management Program
Understand Your Financial Situation
Before registering for a debt management program, you must study and understand the scope of your troubles. First, you should talk to a credit advisor from a non-profit credit counseling agency and lay down your financial problems. This is a crucial step before enrolling in any debt relief program. Generally, a credit counseling session will last between 25-30 minutes. The counseling agency will listen to you, analyze your financial situation, and devise the best solution to your finances free of charge.
Remember to ask your agency about its privacy policies. Before providing your financial information, you should find out how the debt management company will use it. Find out if they are allowed to share it with third parties and request a privacy policy statement that explains how your financial information will be protected. Customers should also find out how their payments will be channeled to their creditors and request proof, whether through a monthly statement or the agency’s website.
Check out the Debt Management Program Reviews
Your prospective debt management company should be reliable, with an excellent profile and numerous positive reviews. A good debt management company should make their client reviews, feedback, and ratings available on their websites for potential clients. For instance, you can check out Freedom Debt Relief reviews from customers on the website and get a clear view of their customer service and success stories.
The company also has a Better Business Bureau(BBB) profile where you can see the customer’s feedback, including comments and complaints. This way, you can choose a company with few complaints it is working to resolve.
A renowned debt management agency also has a review site such as Trustpilot. Like BBB, Trustpilot allows the customers to understand the good, bad, and ugly of a prospective company. Additionally, a legitimate debt management agency is CoA (Council of Accreditation) accredited. CoA-accredited organizations are high standards with respect to efficiency, accountability, respect, employee qualification, and data protection. Ensure that the company you are considering working with checks off all the boxes to ensure a smooth operation.
Find out About Debt Management Fees
Sure the initial debt management consultation is free. However, some charges will accrue if you proceed to enroll in a debt management program. That said, you should remember that different debt management programs charge different fees. It is, therefore, crucial that you find out about the charges before anything else.
Ask for a concise layout of how the fees are assessed and the payment plan should you choose to enroll in that specific program. Remember that most debt management agencies are regulated by state laws. You can ask your agent about any state role related to the service you need.
Here are other things to remember:
- You can talk to your counselor if you cannot afford the fees. Most agencies are willing to waive their fees for legit cases.
- Enquire about financial education. The debt management agency should provide clients with useful financial instructional material and continuous counseling free of charge.
- Ask if your debt management is licensed. Many American states license and regulate debt management agencies. If your agency is unlicensed in a state that demands a license, move on.
- Ensure the agency evaluates your financial condition by reviewing your financial statements, account interest rates, creditor details, and account status. This should be the first step before they give you the ultimate quote for the service.
Review your Action Plan, Terms, and Agreement
Do not sign and approve a debt management plan if you do not understand the agreement, repayment, or ultimate action plan. Ensure you understand the budget, credit card relief options, monthly payments, actual fees charged, late payment penalties, or penalties for quitting the program. You should also review and compare approximate interest savings from various debt management agencies.
A debt management program is a crucial, long-term partnership that should be entered with a clear understanding. Take time to study and understand the terms and fees involved. You should also understand your responsibilities in a debt management program.
After all, these are your debts. You are, therefore, responsible for their repayment even when your agency is playing its part in handling the rest. Do not enter a debt management program if you foresee more debts that might result in frustrating default cases. Be bold enough to ask questions and seek clarification without fear of intimation. These are your debts, your money, and your life. You can explore any option, ask for help, and choose the best solution.
