Debt Management Program: Is this the solution for you?

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What Is the Credit Card Dispute Process?

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Get Professional Debt Management Guidance Debt Management can save you lots of money and get you out of this mess. But first, have a free professional consultation to decide if this is the best path for you. Learn more here. Click here to get it done

A powerful option:
Debt Management

What is a debt management program?

A debt management program (DMP) is the poor second cousin of a good Consolidation Loan. It is for people who have a poor credit rating, and are having trouble even meeting monthly minimums. It is a kind of "intensive care" solution.

Very often, a Debt Settlement program is the better solution. Click here to learn more about debt settlement.

How Does Debt Management Work?

The debt management company that will manage your program becomes your representative to the credit card companies. They will take charge of paying your debt back, and improve the terms with all of the companies through negotiation. You arrange to pay them the monthly fee and they take care of the credit card companies. Debt management programs run from 3 to 5 years.

During the time you are in a debt management program, you will not be able to activate new credit cards or take out new loans. You will be able to keep one credit card available for emergencies, and that's it. Companies will agree to improve the terms of your debt because you are unable to meet the original terms. If they see you getting new credit cards, all deals may be canceled.

These programs can be lifesavers, but some of them can also not be. A good debt management program will dramatically improve the interest rates and the monthly payment. Reputable ones have good relationships with creditors, and can negotiate payment arrangements that the individuals often can't.

Further, by taking over the handling of your debts, you are protected from error.

What are the benefits of a debt management program?

• A concrete timeframe for getting out of debt
• A solution for people with poor credit scores
• Potentially lots of money saved through drastically better interest rates
• Simplifying the process by one monthly payment
• Paying the full debt, which in the long term, improves credit

What are the downsides of a debt management program?

• There is a monthly management fee
• Lower monthly payments may mean a longer payback time, which can cost more money in interest
• A short-term significant lowering of your credit score
• Difficulty or inability to get loans or new cards during the program
• Danger of cancellation or financial harm if you miss a payment to the DMP

What should you look for and look out for in a DMP?

First of all, you must do the math. Click here to evaluate your situation with our Debt Auditor Calculator.

Once you know the numbers, you have to evaluate if the offer the debt management company makes you adds up.

• Are the new interest rates so much better?
• If you had the monthly DMP fee, does it make economic sense?
• Do you save money over the term of the program, or lose money?

Most importantly, will you have the discipline to change your spending habits so that the debt management program will work? If you fail to meet the terms, you can cause more harm than good. If you succeed, this can be an elegant solution.