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Tuesday, February 24, 2009

Is Debt Management Plan Fit For You?

By Paul J. Easton

Are you considering enrolling in one of those debt management plan services? Is a debt management planning a good option for you? Will the company you are currently transacting with still provide you with continued advice even if you don't enroll in their debt management plan? These are just the main questions you should ask yourself before even taking into account a debt management plan.

Anyway, how does your debt management plan work? What will give assurance that my creditors are paid by their respective due dates? Debt management plans or DMP are informal arrangements between you and your creditors with the DMP organization in the middle. There are free DMP organizations sponsored by creditors for risk mitigation purposes. Some DMP organizations are fee-charging.

As a matter of protocol, the acceptance of a proposal for a debt management plan put forward by your DMP organization on your behalf is always at the discretion of the creditors and is not always assured. A good and reputable credit counseling or debt advice service acknowledges this fact. Thus, they only will suggest a debtor pays what they can sensibly afford to consistently follow the plan.

The amount you pay in a debt management plan is an amount usually studied well and only determined after certain priority costs like food and utilities. It is most likely that creditors review your financial situation yearly to make sure you are paying as much as you can reasonably afford. Your DMP organization is well adept with this system and will likely be there to support you.

If you are certain after doing your homework that a debt management plan is really appropriate for you, sign up with one which allows all your creditors to be paid before your payment due dates at the correct billing cycle. If an organization you are dealing with now offers only DMP and no other services, you will just get a biased opinion over their financial product. Skip that company and look further.

If possible, consult with as many companies in the same category. If you are decided to go for it, prepare yourself as a DMP will likely have a negative impact in your credit rating. Lastly, find a DMP organization that can help you with budgeting and money management skills on top of your DMP.

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