For those of you who are not very much familiar with debt management, here are some frequently asked questions. Hopefully you will find answers to your questions about debt management solutions.
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What is a debt management plan?
A debt management plan (DMP) is a strategy that debt handling agencies use to help you pay off your debts with reduced interest rates and on time. In this way, you can save yourself from paying extra because of late payments.
• What types of debt are included in debt management plans?
All types of unsecured debts, like personal loans, credit cards, utility bills, medical bills and repossession loans can be covered under the DMP. However, secured debts like car loans or mortgage are not included.
• Can DMP save me from creditors' legal action?
No, creditors can still take legal action against you. However a Debt Management Solutions company can produce your payment history as a proof that you are paying your debt.
• Can buying a car or home affect a DMP?
No, not if you have been in a DMP for at least one year without any late payments.
• How do I know if the creditors are paid?
Many debt management solutions providers offer a detailed monthly statement regarding the debt settlement analysis. You can refer to it to know how much is paid and how much debt is remaining to be paid.
• Do I need to attend debt management counseling?
If your expenditures exceed your income or you are living from one paycheck to the next, then you definitely need counseling. These counseling sessions are meant to make you aware of your debt status and to teach you about the possible repercussions you might face if you ignore your debt.
• Is debt consolidation a better option than bankruptcy?
Yes, it's definitely a better option. With the lower interest rates of consolidation loans, you can easily pay off your debts one at a time. However, remember to pay off your consolidation loan in time or you will find yourself in debt once again.
• How good is debt settlement?
Debt settlement normally reduces your debt up to 40-60%. Therefore it is a good option to reduce your outstanding balances.
• How much time it will take for me to be debt-free?
It depends on your monthly payments. Normally it takes from 2-5 years to settle all debts.
• How can I find the right debt settlement firm?
You can check the rating of the debt management firm. A decent rating will ensure it is a reliable company. Also find out if it's accredited by the Business Bureaus. It's even better if the firm is a member of Trade Association of Settlement Companies (TASC).
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