No matter how much we bat it off, the fear of being shrouded by a huge debt consumes the best of us; coming through impulsive spending, mindless credit card usage or just sheer carelessness. Yet, contrary to popular belief, there are ways to getting out of a debt –it, however, requires time, effort and constant control on the amount of money you spend. This is exactly where a Debt Management Plan comes in play.
What is a Debt Management Plan? Simply put, you (or a third party) will mediate a deal between you and your creditors. You or this third party proposes a deal to the creditors, and they are likely to accept – most companies refrain from taking legal action against people in debt, as it wastes both time and money.
A Debt Management Plan is basically an agreement between you and the creditors, where you pay back your total debt in a specific amount of time with a fixed rate of interest. It is generally hailed as the best solution for both parties – the creditors are saved from legal proceedings and receive their due payment, while the debtor is no longer under debt.
How do you know if you need a Debt Management Plan? For starters, it’s necessary to evaluate the amount of debt you are under. According to analyst, Eric Tyson, the median credit card debt in USA is around three thousand dollars. If you are in this range, determination and a little self-control may help you to pay off your debts easily.
However, if you have accumulated a greater debt than this, and you feel you cannot handle it, you may need to consider a Debt Management Plan. Such a plan will enable you to get rid of your debt, and fix the damages done to your credit score in the process. However, keep in mind that it may affect your credit score and prevent other companies from giving you credit for sometime.
If your debt is manageable, you should track your spending habits for the past month or so. Make sure that you comprehend where you have incurred the most debt, and make a list of your creditors and the amounts owed to them. You may be able to pay off your debt yourself in this process.
However, if it is unmanageable, then third party assistance is definitely the best step to take. This third party organization looks at your debts and analyses your income, budget and spending habits. It then proceeds to negotiate with your creditors to give you the best interest rates and time bracket. Keep in mind that your creditors may feel better about giving you leverage in this matter if your third party negotiator can assure them of your own dedication and commitment to it.
Another way to be sure of your need for a Debt Management Plan is to take the advice of a non-profit Debt Management company. Such companies often give free advice, and it may prove beneficial for you to consult them before making a decision. They may be able to help you devise a plan on your own, which would save you both time, money and the hassle of hiring a third party.The final decision to opt for a Debt Management Plan lies with you. If you feel that you cannot handle your debts on your own, it is probably the best alternative for you – however, it still requires effort and dedication on your part. A company can help you with a plan and negotiations, but only you can control the amount of money you spend.