General Information Regarding A Debt Consolidation Management Program
Debt consolidation companies, banks, building societies, and non-profit charity organizations provide debt consolidation management assistance to consumers. They help individuals create a budget and provide guidance regarding debt reduction and management.
The goal is to help people in debt to begin repaying the money and start living affordably so the situation does not reoccur. Consumers who have a pile of unpaid bills should get help immediately.
Debt consolidation management is designed for people who are struggling to make payments on current debt. A formal plan is developed that includes the agreement of the debtor to make a predetermined monthly payment to each creditor.
A debt management plan provider or operator manages the program, which includes negotiating with creditors and managing payments on behalf of the debtor
The monthly payment specified within the debt consolidation management plan is based on how much the debtor can afford to pay. This single payment represents a portion of money owed to each creditor. The debtor makes the payment each month and the plan provider or operator distributes the proper amount to each creditor.
By establishing this plan, the debtor is promising to repay debts in full. Debt consolidation companies usually charge a fee to set up this plan but entities like CCCS and the National Debtline offer their services at no charge.
A plan like this is attractive to many people because it features a debt consolidation loan with a lower interest rate than the rate included with each existing debt. This, in addition to the extended period established for debt repayment, lowers the monthly payment.
On top of this, creditors may agree to freeze interest charges while the debt consolidation management plan is being established, preventing additional interest from accruing during the three to five weeks this typically takes.
Making a single payment each month for a debt consolidation loan, rather than paying each creditor individually, provides consumers with more control over their finances. However, consumers should be aware that only unsecured debts can be included under this program.
Therefore, a mortgage or financed automobile may not be incorporated. In addition, creditors for unsecured debts are not required to agree to the proposed plan. They can continue to request payment or even take the debtor to court.
These days, many creditors are more willing to participate in these programs because they would rather receive payments over a longer period than not at all
Debt consolidation management programs can provide consumers with peace of mind, but they do not offer any write-off of debt.
Consumers will be free of harassment from creditors or their debt collectors but they are responsible for repaying the full amount of outstanding debt, while continuing to make payments on secured debts.
When researching debt consolidation management providers, consumers should make sure the entity is licensed by the Office of Fair Trading. Providers should inform consumers of all ways to handle their debt issues. They should also reveal up-front the cost of establishing a debt management plan and who is responsible to pay this expense.
Only consumers who have money remaining after essential expense are paid will qualify for a debt consolidation management program. If the budget reveals that only a small amount of money remains, consumers should request debt consolidation advice from experienced counselors.
These professionals can suggest ways to address the issue other than with debt consolidation loans.