Debt Management Program

Simplify Debt Reduction with a
Debt Management Program

Credit counseling services and debt management programs abound.  They can be very helpful in helping you get a handle on your debt. This method of paying off your debt means that, rather than getting another loan to pay off all of your debts, you pay off the debts according to a monthly plan set by you and your credit counselor. A debt management program actually takes over the payment for you.  You send the company one check each month, and they send payments to each of your creditors. This program will also allow the company to call, on your behalf, each of your creditors to try to convince the creditor to settle for less money or a reduction in fees or interest.

A debt management program does affect your credit score because the fact that you are using a credit counseling service will appear on your credit report as soon as your credit counselor starts calling your creditors.  This is a temporary effect because your credit score will go up once you have paid off your debt. This should not have an effect on your ability to borrow.  You are not allowed to obtain credit while you are on a Debt Management Program anyway.

A debt management program will cost you some money at some point in time. Hopefully the fee will be more than made up for in the amount you have saved through their negotiations, and because you will no longer have any late payment charges.

When choosing a credit counselor, be sure to choose a service that actually spends time getting to know your needs, rather than just pushing you onto a Debt Management Program. If you do decide to go onto a debt management program, be certain that the entirety of all of your payments will go to your creditors.  Also be sure you are aware of and understand any fees the credit counseling service charges before you enter into an agreement.