The Debt Management Plan

When entering into a debt management plan in credit counseling, keep these things in mind.

Credit counseling offers one way for you to settle your debts. Sometimes, in the cases of severe debt, a credit counselor will recommend a debt management plan.

With a debt management plan, you will deposit money every month to an account with the credit counseling service.  From there, the service will pay an amount to each of your creditors.  The client often benefits from lower fees and interest. However, the plan may take longer to complete, thereby adding more interest to your debt in the long run.

Once a debt management plan is worked out, you should contact the creditors to make sure they have agreed to the plan. You should also make regular, timely payments. Check your monthly statements to make sure creditors are getting paid, and contact the credit counseling company if creditors are not being paid.

Only enter into a debt management plan after discussing it with your credit counselor. He or she should take the time to analyze your financial situation and discuss your options with you. You may seek advice from the counselor on creating a budget and managing your money.

As an alternative to debt management, review your other options through debt settlement, or debt consolidation.