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How to Choose a Debt Management Program

How to Choose a Debt Management Program

from wikiHow – The How to Manual That You Can Edit A debt management plan may help, but do your research and consider all your options first.]]If your finances take a turn for the worse and you find yourself drowning in debt, a debt management program may help you keep your head above water. Debt management programs (sometimes called debt management plans) may be able to help you negotiate lower interest rates, get late fees waived, work out a payment schedule that’s acceptable to you and to your creditors, and consolidate your monthly payments into one. [ad]Keep in mind, however, that there are a lot of debt management programs that are unreliable or that charge exorbitant fees, and there are some that are just plain fraudulent. Also,keep in mind that the purpose of an agency debt management program is to get you out of debt and avoid bankruptcy. If your credit isn’t damaged, it probably will be by utilizing a reputable consumer credit counseling agency. Because their job is to help you live while paying off your creditors and acting on your behalf. Once you enter into the agreement with an agency, let them handle the collectors.

Steps

1. Do it yourself. The best kept secret in the debt management industry is that you can do most of the things debt management agencies do, and if you do it yourself, you can save yourself a lot of money in fees. Make a budget, cut unnecessary expenses, prioritize your debts, and call your creditors to ask if they’ll waive your late fees, reduce your interest rates, and/or work with you on a payment schedule. You may even be able to get them to “re-age” your account, which means that they report your past-due account as current. There’s no guarantee that they will, but there’s also no guarantee they will if you go through a debt management agency, so you’ve got nothing to lose by trying. Many times creditors will be happy to work with you if you make a good-faith effort to pay them.
2. Find a good credit counselor. Almost all debt management programs are administered by consumer credit counseling agencies–so much so, in fact, that the terms “credit counseling” and “debt management” are often used interchangeably. They’re not the same, though. You can and should get real credit counseling before you commit to a debt management program, and a credit counselor can and should help you make a budget and explore other options (such as self-help methods or consolidation loans) with you instead of just pushing you into a debt management program. Thoroughly researching the agency is the most important thing to do before deciding to enroll in their debt management program.
3. Look for a licensed, accredited, non-profit agency, and be sure to verify that they are currently licensed in your state (unless you’re in a state that doesn’t require licensing), have current accreditation and that they do indeed have non-profit status. Understand, however, that while these measures can help establish a firm’s legitimacy, they are no guarantee, and you still need to research the agency. Note also that a non-profit company does not mean that they do not charge for their services, it only means that the company will distribute all profits to the corporate officers at the fiscal year end, thereby zeroing their profit.
4. Find out exactly how the program works. The terms “debt management,” “debt consolidation,” and “debt negotiation” are often used interchangeably, sometimes in an effort to confuse or deceive people and sometimes quite innocently. They do, however, refer to three different options, so regardless of what a program is called, find out what it is. For more information on the differences between these options, check out the article on how to consolidate loans.
5. Make sure the company requires complete information from current statements before giving you a quote. The debt counselor will need you to provide all your current credit card and loan statements before they can tell you how much your monthly payments will be or how long it will take to complete the program. Beware of anyone who gives you a quote without thoroughly researching the following first:
   • your account statuses
   • creditor names
   • balance transfer, cash advance and large purchase activities
   • minimum payment amounts
   • interest rates
6. Avoid outrageous upfront fees. A small initial fee (up to $50 or, in rare cases, as much as $100 if you have a lot of debt or high income) is normal, but large upfront fees are out of line. If any agency asks for a fee (or donation) make sure that you know what it will cover, and get it in writing. Find out if you’ll have to pay any additional fees to start the program. Don’t get tricked into paying one “consultation fee,” and then an “application fee” or “an enrollment fee.” If you’re truly unable to pay, look for an agency that is willing to waive the fee or spread it out (without charging additional fees for doing so).
7. Avoid high monthly fees. Most debt management plans charge a nominal monthly fee to cover the administrative expenses. Depending on the number of creditors you have, the monthly fee may vary, but it generally should be between $2-5 per creditor or, at most, not more than $50 per month. Make sure the agency doesn’t charge any other maintenance fees (i.e. an annual fee) in addition to monthly fees.
8. Find out how payments will be disbursed to your creditors. Debt management companies are notorious for sending payments late and getting their clients into trouble with creditors. Make sure the agency will send your payments to creditors on time and within the correct billing cycle. Ask how soon they will disburse your payment after they receive it, and find out how you can track the payments made. They should send you a statement each month or have some way for you to look it up online.
9. Find out how your personal information will be protected. When you enter a debt management program, you have to share some of your most sensitive financial information with the counseling agency. You’d better make sure they won’t sell it to others or disclose the information to anyone except the creditors you’ve agreed to include in the plan. Get a written privacy policy from them, and ask what safeguards they have in place to protect your information.
10. Accept a plan only if you can fulfill your requirements. If you can’t make the monthly payment the program requires, don’t enroll. Ask if they can get it any lower, contact your creditors yourself, and/or check with another debt management agency. Also, be aware that many debt management plans require you to avoid taking on any additional debt or at least any additional revolving credit debt (i.e. credit cards, store charge accounts). Understand the terms and conditions, and make sure you can follow through on them.
11. Get everything in writing. Before enrolling in a plan, make sure you get a contract. Get all verbal promises in writing, and read the contract very carefully to make sure the terms are the same as those you discussed. Watch very carefully for hidden fees. If a company won’t send you a contract before you make your first monthly payment, don’t pay them and go elsewhere for help.
12. Also cut up every credit card you have so you won’t go into any more debt than what you already have. This will keep you out of bankrupcy.

Tips

• A process of negotiation will occur between your debt consolidation agency and your lenders. Many reputable debt agencies will have considerable negotiating power with your lenders and will be able to help you in both the short and long term. There is no guarantee, however, that the negotiation will be successful. Lenders do not have to accept reduced repayments or altered terms.
• On rare occasions, a creditor will require that you make a payment to the debt management or credit counseling agency before they will accept the proposed plan. If an agency tells you this, however, call the creditor to verify it, and make sure the payment will in fact be sent to the creditor.
• Check with the Department of Justice. Beginning October 17, 2005, all bankruptcy debtors have to go through approved credit counseling. Credit counseling agencies must be approved and are monitored by the Justice Department. To find approved credit counselors by state, see the External Links below.

Warnings

• Continue to make payments to your creditors until you are certain that they have accepted the debt management program and you know when the debt management agency will pay the creditors. If you miss payments in the meantime, you may incur further charges and the creditors may back out of the agreement.
• It cannot be stressed enough that you need to take the time to thoroughly research your options. If you fail to do the proper research and get taken by a fraudulent or deceptive company, it is you who will lose money (sometimes a lot of money) and have to face the consequences.
• This article is intended to provide general guidelines only and is not intended to replace professional legal or financial advice. Individual financial circumstances vary, and you need to choose an option that works best for you.

Related wikiHows

• How to Make a Debt Management Program Work for You
• How to Choose a Credit Counseling Agency
• How to Get Out of Debt
• How to Consolidate Loans
• How to Prioritise Your Debts
• How to Repair Your Credit
• How to File Bankruptcy
• How to Bank
• How to Avoid Property Repossession
• How to Start Living Frugally

Sources and Citations

• To find approved credit counselors by state, go to http://www.usdoj.gov/ust.
• FTC.gov Federal Trade Commission article on debt management plans. A wide variety of debt-related articles are available on the FTC website.

Article provided by wikiHow, a wiki how-to manual. Please edit this article and find author credits at the original wikiHow article on How to Choose a Debt Management Program. All content on wikiHow can be shared under a Creative Commons license.[ad#ad-1]

College Loan Consolidation

College Loan Consolidation
You can consolidate (combine) multiple federal student loans with various repayment schedules into one loan: either a FFEL Consolidation Loan or a Direct Consolidation Loan, making a single monthly payment to consolidate student loan.
[ad]With a consolidation loan:
• Your monthly payment might be lower.
• You can take a longer time to repay (up to 30 years).
• You will receive a fixed interest rate on your Direct
or FFEL Consolidation Loan.
School Loan consolidation occurs when you combine one or more eligible loans into one loan as either a FFEL Consolidation Loan or a Direct Consolidation Loan resulting in one monthly payment. Compare the cost of repaying your unconsolidated loans with the cost of repaying  a consolidation loan.

Things to consider are:
• Whether you’ll lose any borrower benefits if you
consolidate, such as interest rate discounts or principal
rebates, as these benefits can significantly reduce the cost
of repaying your loans.
• Whether you might lose some discharge (cancellation)
benefits if you include a Perkins Loan in your
consolidation loan.

Carefully review your consolidation options before you apply. Talk to the holder of your loan(s) or debt counselors for more information before you consolidate.

Your parents can also get a Direct or FFEL PLUS Consolidation Loan if they have obtained a PLUS Loan for you. PLUS Loans can only be consolidated once the loans have been fully disbursed. If you’re in default on a federal student loan, you still might be able to consolidate, provided the defaulted loan is not subject to a judgment or wage garnishment.

What kinds of loans can be consolidated?
All federal student loans are eligible for consolidation of debt, and others can be included. To get a complete list of your loans that are eligible for consolidation, contact your lender or the agent servicing your loan(s).
If you’re applying for:
• FFEL Consolidation Loan—Contact your lender or the agent servicing your loan(s).
• Direct Consolidation Loan—Contact the Loan Origination Center’s Consolidation Department at 1-800-557-7392. TTY users may call 1-800-557-7395. Or, go to www.loanconsolidation.ed.gov. When can I consolidate my loans? For both FFEL and Direct Loans you can consolidate:
• During your grace period.
• Once you’ve entered repayment.
• During periods of deferment or forbearance.
• While you’re in school. However, you must be attending at least half-time.* (Caution: with FFEL Consolidation Loans, if the original loans were never in repayment, it is the lender’s option to grant the consolidation.) Direct Consolidation Loans only:
• You must have at least one Direct OR FFEL Stafford Loan. Generally, your loan is in an in-school period if you have been continuously enrolled at least half-time* since the loan was disbursed.
• If the school you’re attending does not participate in the Direct Loan Program, at least one of the loans you consider for  College Loan Consolidation must be a Direct Loan.

Debt Counselors

Debt counselors are trained to formulate a professional financial plan for their clients all with a goal to get them out of debt as fat as possible and keep them out of debt. The responsibility of the debt counselor is to act as the mediator between the debtor and the creditor.

There are many home owners who are deeply tired of playing ‘catch-up’ month to month between the mortgage, personal loans and credit cards. They may be getting further into debt every month with no noticeable way out. Debt Consolidation may just prove to be a solution to the crisis. The theory of Debt Consolidation has helped numerous home owners facing such a dilemma like yourself consolidating their high interest unsecured debts in with their mortgage and enjoy tremendous savings in the process. Debt [ad]consolidation means to consolidating credit debt into a single package.
Many people consolidate their debts every year, and this enables them to reduce their outgoings and make financial management easier. In this day and age, where household finances are acutely strained due to elevated living expenses, rising bills, and elevated food and petrol prices, many more people may decide to consolidate their debts in order to make their budgets stretch further.By consolidation your smaller unsecured debts with one consolidation loan you can enjoy easier financial management, as you will have far fewer debts to juggle. It can be a real struggle to keep up with repayments on a wide range of debts such as credit cards, loans, catalog’s, store cards etc. and this can increase the chances of missed or late repayments. When you consolidate your debts you will only have one debt repayment to keep on top of, which will make it easier, faster, and less stressful to manage your budget
One way that may be suggested to consolidate credit may be to borrow against your retirement fund. A retirement loan does not need a credit check so it is an easy loan for you to get. They may also comes with a low interest rate. These two things indeed make it an easy option in the process to consolidate debt. You will be able to get a fixed interest on a short term loan that will likely be for five years, only think about this if the payments can be made as having retirement funds is also very important. That should make it easy for you to pay off.

A debt counselor will show the different options that are available to consolidate debt – secured loans or unsecured loans. Secured loans use collateral to back the loan in case of default. These types of loans ordinarily provide the lowest interest rates since the lender’s risk is offset by the collateral. Unsecured loans are backed only by your credit worthiness and do not require collateral. Since only your reputation backs the loan, the interest rate is usually a little higher than a secured loan

Usually, matters interrelated to finances are not taken in to serious consideration. This is observed when the majority of the people avail multiple loans from several lenders to fulfill their needs. By the time, the borrower realizes, it is often too late. With massive debt pile up, it puts great amount of pressure on the financial standing. Moreover non repayment of the debts will adversely change the credit score. You can try your best to get out of the debt mess but it will be of no help.

Debt counselors can be used to establish a responsible and informed financial plan for the future. With a Debt counselor you will not only get out of debt, but you will learn budgeting and financial managing techniques to manage your money better.

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