Debt management plans can be offered through different kinds of companies and programs. You can find debt management plans though consumer credit counseling agencies, in conjunction with debt consolidation or through a debt management company.
Debt management plans help consumers to get out of debt through careful budgeting and money management. Typically, debt management companies can get you a lower interest rate or a lower monthly payment because they have relationships with most creditors. However, some creditors will not reduce the interest for certain debts.
If you do decide to sign up for a debt management plan, make sure you can afford it. You can be kicked out of the program for missing one payment. You can also be faulted if the company managing your plan fails to pay your creditors on time. This happens all the time.
The Federal Trade Commission has sued illegitimate counseling agencies for deceiving clients, falsifying their nonprofit status and profiting from debtors. It is very important to do your homework before committing to a debt management plan.
Nonprofit debt management companies are required by law to provide financial education to their clients, something to keep in mind if you are considering this debt relief option.
Be aware of companies that charge high fees for their services, especially high upfront fees. Some companies pressure clients into paying “voluntary fees.” If a debt management company claims they can help you before reviewing your financial situation, they may not be a legitimate debt management service provider.
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