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A Debt Management Program allows you to negotiate
interest rates with your creditors. This is done to lower
high interest rate debt. Allow more of each payment to be
applied toward the balance, not interest. Joining a debt management
program will lower most interest rates and the number of monthly
debt payments by up to 75%.
Debt Management plans are designed
to help make affordable and sustainable repayments
each month. A full assessment of ones debt situation will
be reviewed by the third party that is contracted. Questions
will be asked for income amount, expenses, debts, and any
other relevant information about personal circumstances.
The information will be entered into a
Financial Statement. This will help to determine how
much can be afforded to pay each of the creditors. These
creditors will then be approached and asked to accept the
reduced payments. In most cases creditors will agree to the
plans that are initiated. Once this is accomplished the payments
start, and you are in a debt management program.
A single monthly payment towards
debt is made. All of
each monthly payment goes to reducing debt. Throughout this
debt management plan you can review and make changes
due to whatever financial circumstances arise. The debt plan
will continue until your debt is cleared or until you wish
to end the program.
There are a few restrictions imposed by
creditors when one is enrolled in a debt management
plan. In most cases the accounts placed under debt
management must be closed. Creditors will not permit further
charges on these accounts. Also, one may not apply for any
new credit cards while in the debt program.
Being in a debt management program
makes the point that one entered is dedicated to repaying
off debt. Consideration is usually positive when creditors
review this debt report. While that's true, it will be an
uphill battle to qualify for new credit. First one must have
a couple of years of solid repayment history on their credit
report.
Already having a debt problem,
usually means ones credit rating has already been affected.
If the original contracted terms of the debt can't be met,
creditors will enter one in default. This is recorded on a
credit report for 6 years. A debt management program will
be reflected on your credit rating.
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