Not Made Of Money

A debt management plan can be a useful solution for many people who have become mired down in debt. These plans make it easier for consumers to make progress towards getting out of debt. Before you run out and register for the first debt management plan you find, though, there are some things you should know about them.

So Who Runs A Debt Management Plan?

A debt management plan is usually run by a non-profit agency whose purpose is to help consumers get out of debt. For a fee these agencies register consumers as participants in their plans and assign them a credit counselor. The consumer, then, brings their latest statements from their credit accounts to the counselor for analysis and begins making monthly payments to the agency. The counselor should negotiate better payment terms for the consumer with his creditors, determine what the consumer’s new monthly payment amount will be, and take over making payments to each of the consumer’s creditors.

A Debt Management Plan Sounds Great, Right?

In theory, these debt management plans sound like a great idea for people who are having trouble managing their money. Forget having to decide who will get your money each month. Once you and your credit counselor have worked out the details of your plan, all you have to do is make your regular payments to the debt management agency. This convenience, coupled with the savings you could realize after your counselor calls your creditors to negotiate for better interest rates on your behalf, explains the growing popularity of these plans.

Some Things To Consider About These Plans

There are, however, a couple of problems with these plans, too. For one thing, you have to pay for the use of this service. Sometimes, the fee is minimal. But some credit counseling agencies charge way too much for membership in their debt management plans. In addition, paying your creditors through these plans will have a negative impact on your credit report. You should know, though, that the damage is much less than the damage that comes with not paying your debts, at all.

All of these things considered, I still think that a debt management plan can be good for some people. Before entering into one, you simply need to do a little homework. Make sure that the credit counseling agency you’re considering is a reputable firm. You can always check out the Better Business Bureau to see if there have been any complaints about the company. Then, you need to check out their fee structure. The last thing you need is another large, monthly payment. Finally, once you’ve started making payments to the agency, make sure that you check your credit card statements each month to verify that your payments are making it to your creditors.

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