Eliminating Debt with a Debt Management Plan
A debt management plan is something that consumers can set up for themselves. They have spent too much money in the past and they need to now apply a portion of their income toward repaying their debts because their credit scores are suffering. If they can set up a budget and stay with it until they are out of debt, they can work to keep from falling into the horrible cycle again.
The Real World
The above scenario would be great, but most people are not able to go from guiding too much money in the wrong direction toward creating a debt management plan they can remain on until their financial situations are healthy again. These people do not need to feel any shame in the fact that they need help in this area because credit counseling agencies have devoted themselves to helping people with their finances.
How a Credit Counseling Agency Creates a Budget
A credit counseling agency is a company where representatives work with their clients to create a debt management plan that will be workable for them. The first thing these counselors will want to do is help people manage their debts. The consumers will be instrumental in this first area because they will need to be open and honest about who they owe money to and how much. All debts other than secured debts like mortgages may be able to be included in the plan.
After the counselors know how much their clients owe in unsecured debts, such as credit card debt or medical bills, they can determine how much their clients need to pay every month for their living expenses. The mortgage and any other loans along with household expenses will be included in this amount. The consumers will inform their counselors of how much they earn every month. If it is possible for their clients to contribute money toward their debt management plans, the counselors can set to work negotiating with the creditors.
The Repayment Period
While the negotiations are going on, credit counselors may be able to offer the creditors a settlement that their clients will save for over a period of time. If possible, the consumers will pay less than they owe, and the creditors will agree not to pursue these consumers for the remainder of the debt. The counselors may also be able to obtain an agreement with the creditors where they will lower the interest rate and remove any previous interest and late fees or penalties.
The Desired Outcome of Credit Counseling
With the help of these counselors who are working with the creditors, consumers begin to reduce their debts. They are forced onto a budget that makes it possible for them to pay all of their bills and save money to pay their debts. Their credit scores go down a little under this type of plan, but it benefits their scores in the long run.
These services will be very affordable because they will not require people to pay a monthly fee or a portion of the amount their counselors save them.
This post is brought to you on behalf of Credit Counselling Services of Atlantic Canada, your debt management and consolidation plan expert. Visit us today!