Debt Management Plan

Here is some good advice from the FTC. You can go to their site for more information: http://www.ftc.gov If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a DMP is appropriate for you, a reputable credit counseling organization still can help you create a budget and teach you money management skills. In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees, but check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments, and could take 48 months or more to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You may have to agree not to apply for - or use - any additional credit while you’re participating in the plan. Protect Yourself Be wary of credit counseling organizations that: • charge high up-front or monthly fees for enrolling in credit counseling or a DMP. • pressure you to make "voluntary contributions," another name for fees. • won't send you free information about the services they provide without requiring you to provide personal financial information, such as credit card account numbers, and balances. • try to enroll you in a DMP without spending time reviewing your financial situation. • offer to enroll you in a DMP without teaching you budgeting and money management skills. • demand that you make payments into a DMP before your creditors have accepted you into the program.

Paying Your Debt Down

Did you know that over 35 million Americans only make the minimum payment on their credit cards every month? By doing this, the interest piles up and the banks get richers as people look for debt relief. Pay as much as you can and keep paying your debt down. One day you will be debt free!

Credit Card Debt Gets More Expensive

If your credit card company has just informed you that they are raising your interest rate because you have too much debt and therefore are a credit risk, you can take action. Say you had a Citibank card that was at 8.9% interest and now they want to raise it to 19.99% because you have high balances on your other cards. You can ask them to close the account and demand that you stay at the 8.9%. You continue to make payments, but at the original rate and not the horrific new rate. If your rate is adjustable, you will still get small bumps in your rate just as you would have had you stayed at the 8.9% rate. Many of these rates are based on the prime rate. The prime rate has been steadily been going up over the past two years.

Eliminate Debt, Avoid It

The easiest way to eliminate debt is to avoid it. It is also the hardest way. If you have a large amount of debt you already know that you spent more than you could afford. If you do not have a large amount of debt, or very little, stay the course. You can eliminate credit debt by tearing up credit cards and closing the account while still paying off the balance. Many people do not realize you can close a credit card account and still make the same payments at the same rates. Go close an account you really hate and keep paying it off.

Debt Consolidation – Reputable Agencies

Make sure you find a reputable company when consolidating debt. When considering what company to use you should check to see if they are a member of either of these two groups: Association of Independent Consumer Credit Counseling Agencies National Foundation of Credit Counseling

Low Credit Card Interest Scam

You need to get rid of all your credit card debt. This is my mantra. Even those low introductory balances are trouble. If you accepted a balance transfer 0% or 3.99%, take a look at how you are paying that back. When you make a payment, all of the principle is paying off the amount you owe that is at the lower rate. The credit card companies count on you adding more to your card at your regular interest rate, so that they continue to collect the higher rate while they work hard at eliminating the balance with the lower rate. Nice huh?

Debt Consolidation - Fixed Monthly Payment

Debt Consolidation agencies determine what your fixed monthly consolidated payment is going to be. They figure out the lowest payment that your creditors will accept. Your monthly payment is then distributed to each of your creditors. Most creditors will cooperate with the agency you work with if you can pay the minimum payment sans the interest. Depending on how slimy your credit card company is the interest rate reduction might be from zero to a complete freeze. Any reduction in interest can save you money. By the time you get to the point of considering debt consolidation, your interest rates are typically much higher than what you originally agreed to pay. It's all spelled out in the fine print you can't read.

What Is Debt Consolidation?

Debt Consolidation is something to consider if you have credit card debt, medical expenses, bank loans, and retail charge accounts. The goal is to get your monthly payment down to something manageable. By cutting interest charges and lowering the monthly payment, debt consolidation helps you to pay your bills on time and improve your credit rating. It will also end the never-ending calls from the collection companies.

What is Debt Settlement or Elimination?

Debt elimination is an alternative way to eliminate much of your debt if you meet a certain credit profile. You hire a debt settlement professional who will negotiate with your creditors to reduce the total amount of your debt. They usually try to reduce the total debt owed by 50% to 75% and get a single payment per month to pay down the new (reduced) debt balance. Once you engage a debt elimination company and have been qualified, they get your creditors to stop calling you. The company handles all future correspondence with your creditors. It is like a relationship with a lawyer, they represent you. They are going to do all the negotiation for you. All debt arbitration is dealt with by the company. Usually you are assigned a person who handles this for you. The company then starts the negotiation process. It doesn’t take a rocket scientist to figure out that the credit companies have lured people into a financial mess. Although we are all responsible for the debt we accumulate, the credit card companies are deceptive in the way they get people to buy into debt. I find it repulsive actually. The reason these slimy credit card companies are willing to reduce your debt by as much as 75% is because they realize you have lost in the game and are headed into bankruptcy. They may never get anything from the bankruptcy, so 25% is better than none. If you are in a desperate situation and want to avoid bankruptcy, it is an option. Make sure you contact a viable company with a good record. Check the BBB!

If You Consolidate Your Debt...

You have paid off your outstanding credit card debt by consolidating your debts into one loan or taking out a second mortgage. There are pros and cons to the way you consolidate debt, but it can help. Watch out. Once you have the new loan and all you cards paid off, rip up the cards except the one that has a decent interest rate. Keep that for emergencies only or to use for business trips if you do not have a corporate card. Never take that last credit card into a store and justify a purchase. If you buy one thing on that card, you may fall victim like so many others. Before you know it, your credit card is maxed and now you have your previous debt plus new debt. Dangerous! Better yet, get an American Express card, where you have to pay off the balance every month. That holds you accountable. Stay credit card debt free.