Saturday, February 02, 2008

"Do I Need a Debt Management Plan?"

This guest post from Consumer Credit Counseling Service (CCCS) defines and addresses the need for Debt Management Plans.

"A Debt Management Plan is particularly helpful for consumers who are struggling to make even the minimum payment on their credit cards," said Jessica Cecere, president of CCCS. "Ultimately, the plan serves the dual purpose of helping consumers repay their debts and helping creditors receive the money owed to them."

What is a Debt Management Plan?

A Debt Management Plan, or DMP, is a repayment plan that provides a systematic method for paying down your outstanding debt.

The repayment period varies based on amount owed and the repayment terms. The average debt management plan is structured to repay debt in 36-60 months.

Signs of Trouble

  • Debt can quickly become overwhelming if you ignore the warning signs. Look for these warning signs and take action to avoid compounding the problem.

  • Using credit cards to cover daily living expenses.

  • Making only minimum payments on credit cards; or struggling to make even minimum payments.

  • Carrying multiple credit cards and rotating their use to juggle balances and due dates.

  • Making payments late or missing payments for more than one month

  • Charging more each month on your credit cards than you are paying toward the balance.

  • Credit cards that are at or close to their limit.

  • Not knowing how much you owe.

  • Calls from creditors.

  • Taking out loans or using equity in your home to pay off debt.

  • An interruption in income would cause immediate difficulty paying bills.

"Ignoring the problem won’t make it go away," said Cecere. "Getting help at the first sign of trouble can make the difference between a financial setback and a financial disaster."

source: CCCS

1 comment:

oneadvice said...

To be honest, not everyone is suitable for a debt management plan. Your eligbility will be dependant on your personal financial circumstances.
But, for some, a debt management plan can be a great way to get your finances in check by offering your the chance to pay one lower monthly amount which will cover all their debts. Although it may take longer to clear the final debt, paying a lower monthly amount can but you in control of your finances, intead of the creditor.
Keep up the good work Frugal Duchess - a nice blog you have here.