Debt Management Plan – A Good Start For Getting Out Of Debt

The management of debt has always been a cause of concern for individuals burdened by debt

. Most of the customers, surprisingly, remain confused with the laws and procedures governing debt management. The US has been a pioneer in the field of debt management with many government, semi-government and private companies jumping into the fray.

It will be better to create a clear and complete understanding of debt management plan to avoid any confusion.

What is meant by Debt management plan?

A debt management plan (DMP) is an effective and efficient method to repay the personal unsecured debts with an active involvement of cataloguing the entire debts, assessment of income as well as budget besides re-negotiating payments and interest rates with the money lenders. A debt management plan is usually run by consumer credit counselling services of a non-profit nature, funded by the creditors, with a predefined aim of collection and distribution of money.

DMP model: In a DMP model, the lenders (creditors) develop repayment plans advising the respective groups about the lender's requirements. The DMP groups are paid for their rendered services and the amount paid is in relation to a fixed 'percentage of funds' (fair share) collected from the borrowers (debtors). However, many eminent governing bodies feel that DMP is nothing but paid debt collection. Moreover, since the tasks performed by a DMP are not of a charity nature, they cannot be termed as Fair share payments. Let us now look at some of the things which must be given due consideration from the viewpoint of the customers while dealing with the debt loans.

When an individual participates in a DMP, the same is usually reflected on the credit report. It is essential for a customer to keep a tab on his bills so as to protect himself from possible frauds. A customer, making payments to the DMP, must ensure beforehand that the proposed plan is pre-approved by the creditor. Creditors are known to minimize the interest rates or avail fee waivers if the payment is received by them through a DMP. The customers must make timely payments of the outstanding amount to ensure receiving fee waivers and/or low interest rates.

Debt Management Plan A Good Start For Getting Out Of Debt

By: Benjamin Axel

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