Debt assistance for consumers who are in need of help to gain control of their personal financial situation have options through debt management plans that will help them find the affordability they need when high debt repayment burdens are in place and debt relief is needed. Obviously, debt management programs are not always helpful for consumers, nor are they necessarily an option that a consumer must take, but this will depend on the types of debt in a consumer’s life, the financial situation they may be in, and their ability to make repayments on their current income.
Some consumers are able to simply budget or speak with their creditors directly and find debt relief options through more affordable repayment requirements or other forms of assistance that a particular creditor may offer. However, if a consumer’s financial situation suddenly deteriorates, due to factors like unemployment, or a consumer doesn’t have the ability to make repayments in relation to their current income because they have simply spent beyond their means to repay, more action beyond a simple phone call to creditors may be needed.
While credit counseling agencies can be helpful in aiding consumers and finding solutions to their debt problems, there are some consumers who may need to go a step further beyond simple credit counseling and enter into a debt management plan. Many individuals often confuse a debt management plan with a debt settlement, but a debt management plan is less severe in relation to the hit a consumer’s credit score can take and it’s simply an agreement worked out between a credit counselor and a consumer’s creditors so that reduced monthly payments may be met while the entirety of a consumer’s debts are eventually repaid.
Debt management plans can do less damage to a consumer’s credit score simply because it is, again, only reducing the monthly payment obligations a consumer may have and, as a result, lowering the likelihood that a consumer will miss payments and do damage to their credit. However, when a credit counseling agency is charged with implementing a debt management plan, there are certain factors that a consumer must consider before entering into this particular agreement and once a debt management plan has been outlined, there are advisers who suggest simple steps that consumers must take to ensure a smooth transition through the debt management program to debt relief.
As an example, after a consumer has attempted to correct debt problems on their own through budgeting or has researched reputable credit counseling agencies and found an agent to review their financial situation, if a debt management plan is still needed and worked out with creditors, the FTC suggests that consumers take certain steps to ensure they will not have any further problems in their financial life as a result of this management plan. Since consumers will typically make payments to a credit counselor or the company implementing their debt management plan, the FTC suggests that consumers contact their creditors to make sure they have accepted the terms of a debt management plan, and if this is the case, consumers should make timely payments each month, carefully review monthly statements to make sure that creditors are being paid according to the plan, and contact the organization that is in charge of their debt management plan if any problems arise.
While debt management plans can offer debt relief when a high amount of debt is problematic in the life of a consumer, they are not the initial steps that many individuals take, but can be one route to avoid more severe options like debt settlement or defaulting, so consumers must be careful to take the proper steps in the debt relief process in order to find the quickest and most cost-efficient debt relief solution for their situation