Debt management program is an arrangement between a lender and a debtor which deal with the repayment of an ongoing debt. Generally this is a debt management program of people dealing with high consumer debt resulting from credit cards or other forms of unsecured debt. It also can be a solution for debt consolidation. A debt management program has two main elements, one is that a viable financial plan is made and the other is that the plan is followed through until the goal is achieved. A debt management plan has several options to choose from.
One option is debt settlement. Under this option, you can make a lump sum payment to the lender at a lower interest rate to clear your outstanding accounts. The advantage is that this type of debt management plan does not affect your credit score in the long term. It is important that this option is taken on a part-time basis as you may need to have some financial discipline in order to pay off the debt as agreed upon. The disadvantage of settlement is that it involves a risk because you may end up paying a higher interest rate than your original credit line.
Another option is debt acceleration. Under this option, you make lower monthly payments until all outstanding debts are paid off. Creditors are informed of your progress in making payments on time and they can accelerate the repayment of your account once your accounts are paid in full. This option does not affect your credit score in the long run. You will however incur new credit card debt to pay for the period when your account was in good standing.
Another debt relief option is paying your bills late. For example, if you fell behind with your car loan payments for twelve consecutive months, you can start paying them on time but add twenty days onto the length of time you must pay. Your lender may then raise your rates which will make it difficult for you to catch up. As soon as you are done paying your late car loan installments, you must begin making payments on your next bill and continue to do so for as long as possible before you fall behind again.
Debt management plans are good if you are making payments consistently. If you are having problems with missing payments, you may still want to consider a debt management plan. Debt consolidation can be used to pay off all your credit cards and loans. This is where all your debt payments are consolidated into one payment to one creditor at a reduced interest rate and you make one payment monthly to cover the total.
Most lenders offer debt management plans. It is best that you research several lenders online before deciding on one to work with. There are many legitimate debt management plans that provide great benefits. It may be worth seeing a credit counseling agency or consumer credit counselors for additional information. Most agencies offer debt consolidation, debt management plans, and other financial services for people who are having financial problems. A credit counselor can give you information on consolidating your unsecured debts with one lender at a reduced rate.