What is a Debt Management Plan, and should I enroll?

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Feb 062013
 

It’s Friday night and you just sat down to watch your favorite show. A few moments later a commercial comes on. That’s right, another credit counseling agency promising to lower your interest rates and stop collection calls. If you’re cynical or what others consider to be a skeptic, you’ll get up and deem this as an opportunity to grab a drink before your show resumes. However, if your values oblige you toward proper money management, you’ll grab a piece of paper and a pen and quickly jot down that phone number.
Free call. Free Analysis. Why not? Grab a drink during the next commercial.

What’s all the hype about anyway? Well its all about “credit card debt” in a nutshell. Most of us have it and truth is, we all want to get rid of it. Let’s face it, credit cards can be a GREAT thing, especially when you’re cruising around the shops window-shopping. A few moments later you realize you have this piece of plastic in your pocket and now you can make that “special” purchase. You may think twice, but in the end you’ll reward yourself. Nothing makes us feel better than buying new things. Unfortunately, if you’re not budgeting properly, you’ll dread the day that credit card bill arrives in the mail, and nothing will make you feel worse.

So how do you know you’re a good candidate for enrolling in a Debt Management Plan? Well, if you’re experiencing any of the following examples, you may need to make that DMP call sooner then you think.

. You pay only the minimum (or even worse you pay less then the minimum) on your credit card and think to yourself, as long as you send “something” that’s good enough.

. You use your credit card to buy things like food, gasoline, cigarettes, or beer.

. Your balances are going up and those over limit fees and late fees no longer surprise you.

. You have more credit cards then a successful gambler has poker chips.

. You’re signing up for every credit card offer in the mail.

. Your credit cards are no longer used for the sake of convenience but rather because you just don’t have any money.

. You’re hiding your purchases from your spouse.

. You change your home phone number in hopes the collection calls will disappear.

. You’ve reached the limit on most of your credit cards and now you’ve developed a significant amount of stress.

. You’re considering bankruptcy as an alternate way of “getting out” of debt.

. You use cash advances on one credit card to pay another credit card.

If you are experiencing any of these symptoms, then your best cure may be a Debt Management Plan. It may be easy getting into debt, but it doesn’t have to be hard getting out of it, if you do it the right way. If you don’t take control of your debt and you fall behind on payments, it will impact your credit report, or even worse, your livelihood.

A DMP is a far better alternative than bankruptcy to get out of debt and a better alternative than a debt consolidation loan or debt settlement. A DMP basically takes all your unsecured debts, and combines them into one monthly payment. However, it is not a loan. Instead of you sending out multiple payments for your credit card bills, you’ll send your credit counseling agency one payment. They in turn disperse it to your individual creditors. If you enroll in a DMP through one of these companies, there should be a fee payable. Make sure you are advised of this before you sign up for the plan. In general, these fees are not too large, and in any case, it’s a small price to pay considering the amount of money you’ll save in the long run. In this case you will have saved money while nobly paying off the entire debt you owe without (a) risking the loss of your home if you are unable to make the monthly payment on a consolidation equity loan and (b) damaging your credit and paying income taxes on the amount of debt not paid on a debt settlement plan. Once enrolled in a DMP, a certified credit counselor contacts your creditors and negotiates a lower payment on your behalf. Even better, they’ll get them to lower the interest rates, cease collection calls, re-age and report your account “as current” and waive or suspend past due fees and over-limit. Sounds good, right? Well remember, these benefits provide you with the opportunity to afford the payments and get them “paid off in full”. Depending on your balance and interest rates, your repayment time can take anywhere between 1 to 5 years. Now, that’s a deal! Considering the fact that without a DMP, you may face a repayment time of 8-15 years. Believe it or not, even more then that if you make the minimum required payments each month.

Once you successfully complete the program, the rewards are even better. You’ve rebuilt a better payment history and you’re debt free. So, the next time someone asks you what is a Debt Management Plan and why should I have one, smile at them, better yet, give them an arrogant smirk and pass along this article.

 

Nathalie Calvin

Budgeting and Debt Management

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Feb 062013
 

Debt management (specifically unsecured) is the first step to taking control of your money! Add a household budgeting plan and you’ve got a powerful tool for money management.

Together, budgeting and debt management build financial security and independence. Yes, you can reduce debt and save for your future financial security at the same time! It can be done.


Anyone can do it and everyone deserves it!
In fact, it’s the only budgeting plan that makes perfect sense. Budgeting to include debt management in your personal finance plan builds a good strong defense against credit card use.

Unexpected events and expenses play a significant role in creating debt for most of us. A good budgeting plan that prepares you for those events and provides a strong foundation to fall back on is essential for successful debt management.

This is where most self-created budgets fail. Even the best intentions are doomed if you are you guilty of this common oversight? Without a complete plan, we fall right back into the old credit card trap. Feeling helpless and cornered into using credit to just make ends meet.

Free yourself from the burden of credit card debt. You will never be financially independent as long as you have to depend on the credit card companies to survive.


Quit investing in the credit card companies and start investing in yourself!
Yes, I know the feelings all too well. Barely making ends meet, budgeting chaos, struggling to maintain “everything’s O.K.” while finances continue to get worse and worse. Stop the feelings of inadequacy and failure!

In today’s fast moving society it’s not unusual for the average family to be living way beyond their means. With that in mind, quit blaming yourself. This is the world we live in. Many of us have gotten trapped by society’s expectations.

I made the decision to stop the madness and help myself! You can too! A budgeting plan that includes managing debt will help you succeed at money management.

Create a plan based on your individual needs…set your own goals…and begin your journey to lifelong financial security and independence! After all, we all have different needs and obligations, so everyone’s plan has to be designed to suit their unique situation.

The key to financial success is to live within your means!
The key to independent wealth is living below your means! But wait…we’re getting way ahead now. After living way beyond your means for so long, it’s hard enough to scale down to reality. Once you have that mastered, and see how much money you didn’t even know you had, you’ll be eager to scale down even more!

Debt management is crucial for any budgeting plan to succeed. And, likewise, a good household budgeting plan is essential for any debt management program to succeed.

One cannot be successful without the other. Like “peanut butter and jelly” most of us can’t have one without the other. They just go together!

Cheryl Johnson is a mother of four helping herself and others become and remain debt free. Publisher of Simple Debt Free Living – A self-help plan, ideas, and resources for debt reduction, personal budgeting, frugal living, and extra income opportunities.

 

 

Cheryl Johnson

Credit Counseling – Can this cause trouble?

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Feb 062013
 

Does your heart skip when the phone rings? Are you afraid to open the mail and get another letter from a debt collector? If so, you are not alone. Many Americans are in debt up to their eyebrows and most don’t even know what options are available to help them. They just struggle paycheck to paycheck, make minimum payments and watch with frustration as the interest rates eat all the payment and the debt seems to just grow.

Credit counseling is one option to help deal with debt problems, but before jumping the gun and signing up with any credit counseling firm do your home work.

Many credit counseling organizations are both legitimate and nonprofit. They work with you to solve your debt problems. However, there are also those who may say “nonprofit” and charge fees. And those that are completely illegitimate. Some credit counseling organizations charge high fees, others hide their fees and the third group may ask for “voluntary” contributions. All of these will eat into the payments you need to make to your debt.

Choosing a Credit Counseling Organization

Find out if they are willing to send you free information about themselves. You are looking for firms who are willing and open about themselves and their policies. If they hassle you for an appointment or want too many details from you before they send you anything, go elsewhere.

What you want to get from a Credit Counseling Organization, to start with, covers the following:

    • Are they licensed to offer you services in your state?

 

  • What are their set-up fees?

 

 

  • What are their monthly fees?

 

 

  • Are there any other fees or contributions required?

 

 

  • What are the qualifications of their counselors?

 

 

  • Are their counselors accredited and/or certified by an outside organization? If so, by whom? If not, how are they trained? Third party certification adds an independent unofficial auditing that is helpful.

 

 

  • How do their counselors get compensated? You want to avoid anything that resembles commission.

 

 

  • What assurance do you get that your private information remains confidential and secure?

 

 

  • What services do they offer? Debt management is just a part of the debt issue and you may need other services to help you accomplish what you need. Look for a wide range of services without bias. If an organization says they have a wide range and then push a particular service such as debt management plan (DMP), then they are biased.

 

 

  • How can they help you with both the immediate debt problem as well as long term plan to help you stay on track?

 

 

  • Will you have a formal written agreement or contract with them? You need everything in writing and you need time to review them before you sign. Consider verbal promises invalid.

 

Once you get the information in the mail you need to confirm that the credit counseling organization is both legitimate and reputable. You can check their legitimacy by contacting your state Attorney General, local consumer protection agency, and Better Business Bureau. See if there are licensed and if there are any complaints against them filed by consumers. Remember that a clean record is just a start and does not guarantee service.

Checking their reputation is harder since they deal with confidential information and you cannot ask them for referrals. I understand that asking friends and family could be a little awkward but getting recommendation from someone who actually has dealt with an organization is one of the best ways to screen a firm.

Many reputable credit counseling organizations offer free educational materials and workshops. They are in the business of helping you get to the root of your budgeting issues. Take advantage of their workshops that will also give you an opportunity to check them out in person.

Your financial institution and your local consumer protection agency could also be good sources of information.

I like what William F. Halsey said about problems. “All problems become smaller if you don’t dodge them, but confront them.”

May your problems become smaller.

Vishy Dadsetan

Credit Counseling or Bankruptcy: Which is Best for You?

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Feb 062013
 

People often get to a place where they simply can’t pay their bills, especially in today’s economy which is not particularly sympathetic toward the poor or even the middle class. Inflation has impacted nearly every facet of daily life including food, gas, rent, clothes, utility bills and more. At the same time, salaries, especially in the lower ranges, have utterly failed to keep pace. When you get to the place where you cannot pay your bills and have money left over for food and other necessities, there are some hard decisions that have to be faced. The options are credit counseling and debt management services, or bankruptcy. Both have their pros and cons, so which road to take depends largely on the individual and how severe his or her financial problems have grown.

There are numerous credit counseling/debt management services available, both in most local communities and over the Internet. The services vary considerably, for example some charge fees and exist to make a profit, while others are strictly operated by volunteers and don’t charge fees for their services. Some services are certified or accredited, and others are not. Some guarantee confidentiality, and unfortunately, others do not.

If your debt situation has not yet reached a point of no return, credit counseling and debt management may be the best option for you. This is the way it works:

  • Check out a variety of counseling services, both in your community and on the Internet to determine which best suits your needs. Avoid those that charge high fees, do not guarantee your privacy and that don’t have any credentials or accreditation to offer.
  • Make an appointment with the agency of your choice. When you go to the appointment, take as much of your paperwork and documentation with you as possible, i.e. proof of your expenses and income, along with verification of the debts you owe.
  • The counselor will review your situation and develop a plan to help you pay off your bills. Legitimate counseling services can often persuade your creditors to take less than the total amount you owe and arrange for longer periods of time to pay the debt off.
  • Instead of paying your bills directly, in most cases, you make one monthly payment to the counseling service, which then distributes that amount among your creditors according to the agreements they have worked out. The arrangement leaves you enough money to live and halts collection procedures. Over a period of time, all your bills are paid in full and you essentially have a new start, provided you don’t get yourself back into additional debt in the meantime.

On the other hand, if you have too much debt and your creditors are not inclined to work out payment arrangements with you, the best possibility may be declaring bankruptcy. There are numerous bankruptcy attorneys and, again, it behooves you to shop around to obtain the best possible services at the least possible price.

It is wisest to work with an attorney who does a lot of bankruptcy work because he or she will be most familiar with the rules and regulations as well as with the judges and bankruptcy trustees who work in the local system. A good attorney will know what the trustees and the courts will allow and what they won’t, and will be able to advise you as to your best options.
There are two kinds of bankruptcies available to individual debtors. Those are Chapter 7 and Chapter 13.

Chapter 7 is a complete discharge of all unsecured debts, and some secured ones, generally including everything except taxes and school loans. The debtor generally has to give up anything of value that can be sold to pay his or her debts, although in most cases a person’s home and their primary transportation are exempted.

In a Chapter 13, nothing has to be given up, but the debts have to be paid in full. The court simply works out a repayment plan and instead of paying the money to your debtors, you pay it to the bankruptcy trustee who then distributes it to the creditors. There are advantages and disadvantages, as well as eligibility requirements, for both types of bankruptcy and the bankruptcy attorney can best advise you which option will work better in your particular situation.

Whether you choose credit counseling or bankruptcy, either one can help you eliminate debt and get back on your financial feet. Both can stop collections procedures and eliminate annoying and harassing phone calls from collectors. The bottom line is, you don’t have to continue suffering; there are ways to get out of the debt situation and begin again. The most important thing is, once you are out of debt, carefully manage your money so you don’t land back in the same situation again.

 

Ethan Hunter

Debt Reduction – The perfect guide

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Feb 062013
 

Many people may say that the process of debt reduction is common sense and obviously, the best way to handle your finances is to pay with cash.

Just because you have incurred debt, doesn’t necessarily imply that you’ve mismanaged your entire financial life. Once you suspect that your debt is starting to get out of control, you may want to consider a quick diet for debt reduction.

The first thing you should do in the process of debt reduction is to stop incurring even more debt. In pursuing your debt reduction goal you must freeze your spending, especially if you don’t have the income to support that debt. After doing so, the next step in debt reduction is to get a plan. Your debt reduction plan must be a roadmap that takes you from debt to debtless. To do that you need to know how much your total debt is and how long it will take to pay it off, given your current payments. Once you know that, you can look forward to the day when your debt is gone!

Look for money saving opportunities as you start to dig into debt reduction and closely examine your situation. When following your debt reduction plan, you’ll start seeing many opportunities to save money, for instance, those low-rate credit card offers that you find in your mailbox almost every day. Knowledge is useless unless you put your plan into action. Formulate your debt reduction plan today and, most importantly, follow through on it!

The next step in debt reduction is tracking credit card offers and loan offers. When you need to turn to another bank for cheaper financing, you’ll have already done the research and know which banks to contact. Also, you need to track offers from your existing credit accounts.

Another important aspect in debt reduction is paying on time no matter what it takes! It is better to borrow money to make sure your payments get there on time.

Debt management is a continuous process so stay on top your situation and keep most of your money!

 

David C Skul

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Things to consider when applying for a payday loan

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Feb 062013
 

Are you thinking of going in for a payday loan to meet an unexpected expense? If so, look into these five things before you finalize one. This checklist can help you make smarter choices. You might even end up saving some serious cash!

  1. First thing to consider — do you really need that cash advance? Sure, you need cash right away, but have you looked at other options? The fact is, a payday loan is an extremely expensive source of funds, with Annual Percentage Rates (APRs) ranging from 300% to 1000%. So before you take one, see if you can arrange money by taking an advance from your employer or from your credit union.You could also consider borrowing money from friends or family. Depending on your situation, credit card funding might be an option too, because it’s usually cheaper than a payday loan.
  2. Ask yourself how much you can really repay when the next payday rolls around. Work out an exact number you can commit to. Take a cash advance only for the amount you can repay, considering all charges as well. Obtain funds from other sources for any additional requirements you may have.
    Here’s why. If you choose to roll over all or part of the payday loan, you end up paying much more — additional charges, late fees, etc. Your APRs start climbing rapidly and you may even find yourself trapped in a vicious cycle of payday loan debt. Stay clear of this trap.
  3. Apply only for one payday loan at a time. Your application gets reported to a consumer tracking database used by payday lenders and banks. If you apply for multiple loans, the lenders may see the multiple applications and you might end up being rejected by all of them.
  4. Go through the lender’s approval criteria very carefully. Apply only to one where you can qualify. If you apply to a company that has stringent criteria and get rejected, that can actually hurt your chances of getting approved by another company with more relaxed criteria.
  5. If you’re applying online, ask yourself if the lender’s website seems professional and well-organized. Do they have clear information and guidelines on the site? A comprehensive FAQ?
    Most important — do they have an SSL certificate on the application page? This indicates data is being transmitted securely. Secure pages have web addresses that begin with “https:” instead of “http:” and in addition, you’ll see a lock symbol displayed in your browser. If a lender is using a non-secure page to collect information about you, find another lender!

Acting on the above points will help you make better choices about payday loans. The best solution is, of course, to get your personal finances into excellent shape so that you never need to borrow in an emergency.

About the Author

Prakash Menon is a financial expert and writer specializing in managing personal debt and providing wealth building solutions. He has written on alternatives to payday loans, personal debt management and other topics.

 

Prakash Menon

 

Get rid of debt

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Feb 062013
 

Automated tracking of spending habits, easy availability of credits and lavish lifestyle, all contribute to the merging debt scenario at individual levels, all across the globe, and especially in developed countries. Americans suffer the most from debt problems. At this scenario bankruptcy is not uncommon. Money owed by consumers amount to trillions. That’s why debt consolidation industries came to the scene. Debt consolidation firms are welcome, by creditors as they save them from getting bankruptcy reports, and by debtors as they improve their credit rating. Debt settlement agencies negotiate with the creditors and reduce your payment by 30% to 60%. The consolidation services minimize your payments below the minimum payments. Creditors feel better off doing the settlements by the help of a debt settlement company so as to get the best possible amount of their credit.

Taking help of a debt settlement/consolidation service is the most professional way of paying off the debts. A debt consolidation company helps you to:.

  • Collate all your debts into a single payment eliminating your worries of multiple payments..
  • Lower the interest rate on the collated payment plan and reduce your payments..
  • Arrange you to deal with only one creditor.

How messy you debt problem may be, there is still a way out. But you have to address your problem to a reliable debt settlement company. Today, lots of individuals stretch themselves beyond the financial limits. Though bankruptcy seems to be an obvious answer, it brings many future repercussions. So, choose the most professional way to get rid of debt. Nobody wants to loose his/her possessions or damage the credit history. Once the debt is settled, one can kick back again with proper financial management. Plan a reasonable budget to make headway on your monthly bills. Avoid late fees, higher interest rates and consolidate the payments. Do not let your debt be written off as bad debt, you will have hard time getting any type of loan. Roads to financial recovery are many just make a start!

While researching consolidations, look at the payment amounts, the interest rates and the savings amount. If you have borrowed many unsecured loans, the debt consolidator working for you will make them only one. You monthly payments will also be reduced and the payment period will be extended. Though a debt consolidation/settlement company is not the cheapest way to get advice from, it is definitely the best way. A debt consolidation company is experienced enough to make you get rid of debt.  A professional debt management specialist can work with both you and your creditors to structure a best suitable arrangement. Make sure your debt amount is more than a few thousand dollars otherwise take the debt settlement on your own. Because the benefit you will get will go as a fee amount.

 Amy Cook

Simple steps to get out of debt

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Feb 062013
 

Someone who is not in debt appreciates a telephone ringing, because a person without excess debt does not fear creditors. A person without excess debt goes to the mailbox with general malaise, and doesn’t feel the stomach clenching fear when a handful of bills appear. Someone without a lot of debt can enjoy shopping, can handle the unexpected, and sleeps better knowing they have their ducks in a row.

Life without debt is difficult to conceive or manage for many people, but a few simple steps can get anyone on their way to being debt free.

The first step towards decreasing debt is to stop creating debt. People who amass a lot of debt often get into a mindset of spending tomorrow’s money, but that only leaves today feeling pinched. Examine spending habits and be aware of what items are necessary for today, and which items are not. Getting out of old debt is easier to manage if a person is not actively creating new debt.

The next step to getting out of debt is to organize all bills and outstanding balances owed. When a person organizes their bills and has a firm grasp on what they owe, they can make better decisions about where their money goes. Also, money spent on late fees, overdraft fees, or over the balance fees is money given away in vain. A person actively trying to get out of debt will do so much more effectively if they are paying their bills on time. To aide in the organization process, a person can buy special folders or create a filing system to keep track and organize bills. A desk calendar marked with bill due dates will help ensure a person committed to getting out of debt doesn’t miss a payment and earn additional fees or accumulated interest.

The third step towards getting out of debt is to increase monthly payments. Paying more than the minimum payment applies more money towards the balance and costs an individual less in interest over the long run. Adding even five additional dollars per payment can reduce the number of payments made of a loan or credit card. Reducing the number of payments made decreases the amount a person pays in interest and fees.

Additional debt management strategies include seeking help from a debt consolidation agency, refinancing, or applying for a loan. When a person has several high interest loans, high interest bills, or higher interest credit cards, they pay more money for the things they bought than those things were actually worth. High interest rates slow down the dent made in the principle owed, and can add years to repayment. Sometimes, one loan can be achieved at a reasonable interest rate, and can be applied to the other debts. This reduces the amount of monthly payments made, and decreases the dollars each month spent vainly on interest.

Getting out of debt can be a life goal, or it can be a goal achieved daily through little steps. Debt can be manageable, but a person must be hands-on about their financial health. A hands-on, educated approach decreases confusion and increases the speed at which debt dwindles and savings increase.

Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.

 

Jakob Jelling

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