Do I need a debt management plan?

Published 10:19 am Tuesday, February 14, 2012

With the New Year well underway, so too is the realization that for many, holiday spending was higher than originally expected.  For some consumers, that means struggling with holiday and other debt well into this calendar year and beyond. Rather than ignore the problem, make payments late or skip payments, it might be time to consider talking to a legitimate professional to discuss a Debt Management Plans (DMP).
A Debt Management Plan is a repayment plan that provides a systematic method for paying down your outstanding debt. For a small monthly fee, consumers make a single payment to an agency which acts as a trustee in distributing the funds to creditors. That agency works with both clients and creditors to design a debt repayment program that minimizes monthly payments, interest and related fees, providing a manageable tailored plan for the client. This enables you to repay your entire debt obligation at more favorable terms, and on a plan that is within your ability to pay. The repayment period varies based on amount owed and the repayment terms, but the average debt management plan is usually structured to repay debt in full within 36-60 months.
Many people who opt for a DMP to repay their unsecured debt are prompted to seek help after late payments have caused their credit card interest rates to soar. Consumers who enroll in a DMP may receive interest rates ranging from 6 percent to 10 percent from some creditors, and can sometimes drop to 2 percent or lower. Lower interest rates can result in lower payments and can help cardholders repay their balances.
Debt can quickly become overwhelming if you ignore the warning signs. Not sure if this is relevant to you or if you need a Debt Management Plan? Take a look for these warning signs and if any of these sound like what you’re doing, please 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 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.
Times are tough for many of us, but ignoring the problem won’t make it go away. Getting help at the first sign of trouble can make the difference between a financial setback and a financial disaster.
The key to reclaiming your financial independence is recognizing the need for help and getting it from a legitimate, reliable provider of certified counselors who can help you evaluate your financial situation and find the solution that best suits you. For more information on Debt Management Plans or to talk with a certified counselor you can contact Consumer Credit Counseling Services of the Carolina Foothills Inc. at 800-567-7062.
Ron Kauffman is a Geriatric Consultant & Planner in private practice in Henderson & Polk Counties.  He is the author of Caring for a Loved One with Alzheimer’s Disease, available at the Polk County Senior Center.  His podcasts can be heard weekly at www.seniorlifestyles.net. You can reach him at his office at 828-696-9799, on his cell at 561-818-0039 or by email at drron561@gmail.com.