We can help you consolidate your debt.
Best Debt Management Programs (2020 Update)
Best Debt Management Companies
- Cambridge Credit Counseling
- InCharge Debt Solutions
- Greenpath Debt Solutions
- Advantage Credit Counseling Services
- ClearPoint Credit Counseling
Simply put, debt management refers to the ways in which you can deal with your debt, an entity you are finding difficult to handle on your own with each passing day. It is important to research on and practice a debt management solution that suits you as it can help you get out of the vicious cycle of expenditure, increasing debt, and more expenditure.
Nowadays, it is also possible, and in fact recommended, that you take outside help for the same that is professional and affordable in nature.
There is no one correct way to deal with credit card debt, and the right option for you totally depends on how grave your situation is.
What are the telltale signs that you should start worrying about your debt?
Your debts start to worry you
At first, this does not make much sense. The thing is, you do not have to perform any kind of mathematical calculations before deciding that you have to do something about your debt situation right now. Simply, ask this question: “Do you feel in any way bothered by the debt you currently owe?” If the answer is yes, then you should do something about it.
One of the biggest mistakes people make nowadays is assumed that because they have not reached that certain point yet (we'll discuss this later on), it's okay to open up new credit cards. In the 2008 financial crisis, many people lost their jobs and ended up in the streets. You can never be a hundred percent certain what will happen tomorrow or the next day or year, so if the situation allows it, it is best not to have any debt at all.
You are having a hard time budgeting
If you are still able to make the payments on time but have to give up a lot in exchange, then you should think about why that is the case. Look closely at your monthly budget and see how much you are allocating for debt payments. Only you can decide how much is tolerable because it can vary based on your lifestyle and household size. If it comes up to the point that you have to forgo healthy snacks to make ends meet, you know you have a problem.
Your debt-to-income ratio is 36% or higher.
Getting your debt-to-income ratio is pretty simple. Simply divide your total monthly debt payments (student loans, mortgage, car, etc.) your net monthly income. In truth, it does not say much about your situation, as we have already established in the previous item. For example, after settling your monthly debt payments, you still have $2,000 left. By yourself or with a partner, you can manage to live a decent life with that amount and perhaps still save a little. But if you have five kids, that would be a different story.
The higher your debt-to-income ratio is, the riskier lenders would think lending you money is.
Your savings is too little compared to your debt
Borrowing money is costly, and how much exactly it would cost you is determined by the interest rate. Aside from the opportunity cost of paying your debt instead of saving, consider also the returns of your savings and investments compared to what you pay in interests. Most of the time, the best action is to simply pay off the debt (or allocate a bigger portion to it against saving and investing) so it would not accrue interests over time.
Living is costly and you should have enough to spend when tragedy comes barging in your life. Even if you currently have a good debt-to-income ratio and do not find it hard budgeting, look at your savings.
What are the different ways to manage debt?
Debt Management Program
A debt management program is offered by debt solution companies that asses your financial situation and accordingly suggest a relief program to help you get out of debt in a stipulated time. A suitable debt management program can very well consolidate your debt payments, help you achieve a stable monthly payment schedule, and make you eligible for lower rates of interest. If done right, the program can even help you pay off your entire debt within three to five years.
Debt management programs force you to make tough decisions regarding your finances. For example, it demands that you stop using your credit cards so that you are not misled into thinking that you need things you can’t even pay for. And in order to achieve this, it offers you lower interest rates in return.
In addition, it consolidates your credit card debt and other unsecured debts into a single monthly payment which is made affordable in accordance with your specific financial situation. For someone who is getting a carefully constructed payment schedule customized for a case-by-case scenario, it is not a hard bargain at all.
Now, debt consolidation is exactly what it sounds like. The company you are aligned with will package all your debts together for you and offer you a loan to pay them off at a lower interest rate. Since the firm already has your financial details, it will use one of your assets, like a home or a car, as security. This makes the process of paying debt linear. The amount of money that is saved on interest is used by the company to pay off your credit card debts and get each of their balances to zero.
So you merely have to switch from paying to three to four creditors every month to making a single payment at almost half the interest rate, while the credit counseling agency does the dirty work of negotiating your loans with the bank and paying off your credit card debt.
This also relieves you of the mental pressure of keeping track of all the individual creditors and their respective payments and due dates. The rate of interest that these companies offer to people who avail their debt management program typically ranges from 8% to 12%. It is advised that you pick a non-profit credit counseling agency for the same.
Under this, you are allowed to get into a consensual deal with your creditor to ward off a specific percentage of your debt. Now, before you start rejoicing at the aspect of an unprecedented decreased debt, let us educate you on the finer aspects of such a deal. The process of debt settlement involves a lot of risky give and take.
In lieu of the creditors agreeing to take less money than you owe them, some severe penalties will be levied on you. Foremost, such an arrangement will negatively affect your credit score for a long time. The fact that you were so deep in debt that you knew you would not be able to pay it off even in the long run will show on your credit report and may prove to be a hindrance in acquiring loans in the future.
Hence, debt settlement will never be a preferred option for any party, be it the borrower, the lender, or the attorney general tasked with carrying out the deal.
Further, even though a small amount of your debt has been waived off, you are still not exempt from the taxes you owe on the forgiven debt. Along with the tax liabilities, you will have to pay the very high attorney fees through which the debt settlement has been enabled in a speedy manner. The attorney will help you re-route your payments to a fund instead of the creditor.
When the fund reaches a pre-specified level, your attorney will play a crucial role in getting your creditor to agree to settle for that amount. If a formal agreement comes through, your debt will officially be considered settled. Due to this, the attorney fees for debt settlements usually range around 10%-20% of the total amount settled.
How to enroll in a debt management plan?
Even though debt management programs are customized to suit your particular needs, not everyone can instantly avail one. Since the matter concerns you incapability to pay off existing debts, you have to be eligible to be able to make use of these services so that the company can retain only serious clients and weed out any unwanted elements. However, it is not as difficult as it sounds.
The most basic step to qualify for a debt management program is to indulge in a credit counseling session with a certified counselor from the debt solution company you choose. This can be easily achieved as companies nowadays offer telephonic and online counseling, along with the traditional in-person approach.
A counseling session is of utmost significance in order to understand your problem. It helps a certified professional gauge the extent of your debt, based on which he recommends different debt management programs to you that have different terms and conditions. In the session, first, the root cause of your debt will be identified. Next, a household budget will be created for you, with your help, of course, that will establish an upper limit for your standard upcoming expenses. Once that is out of the way, the counselor will discuss your credit report with you and chart out all the monthly payments you need to make to pay off your debts.
Taking into consideration all these factors, he will suggest a solution and try to make amends to it to get you on board. This is done so that you feel extremely comfortable with the payment plans that will be set and are fully aware of what you are signing up for. Usually, clients seeking professional advice agree with the recommendations and instantly enroll in the debt management program they have qualified for.
All of this should not take less than 30 minutes or more than 60 minutes of your time. And you also need not worry about how stringent these plans can be. On request, you can be given one credit card that you will only be allowed to use in emergencies. In short, the program does not aim to make your life uncomfortable or less luxurious but to help you reign in unnecessary expenses, all the while keeping you in the loop.
Does bankruptcy come under debt management?
While bankruptcy is certainly a form of debt management, it is essentially the last resort to ward off debts. This happens in cases where debts are so high that it is impossible for the person to pay them off. Under this, you will have to liquidate all of your assets in an attempt to settle your debt, which will legally leave you bankrupt. Other than losing your property, this can severely affect your credit score by as much as 200 points.
Furthermore, bankruptcy will go on your credit report for a minimum of seven to 10 years. Another way of settling debt under bankruptcy, which is equally damaging, is to ask your creditors to eliminate your debt by agreeing to a repayment plan over a time period of three to five years.
On the other hand, a debt management program is not a legal proceeding similar to the abovementioned processes. While it does show on your credit report, it has no substantial impact to that end. In fact, by the end of it, you can see a sure shot increase in your credit score.
To make sure you get to avail the best debt management program in a personalized manner, choose a credit counseling company that is accredited by the National Foundation of Credit Counseling and is a non-profit. This will also ensure that you get charged with a low fee for their services and are provided with impartial financial advice.
Along with equal installment plans, the counselors will also share strategies to save more money in your day-to-day life with you, without compromising on household needs. In case, your financial situation changes in the middle of the program, you can also approach your counselor for a review of your modified requirements.
Popular Debt Management Companies
If you're looking to work with a debt management company, you may be looking for the names of some of the most popular firms in the industry. Check out five of the most popular debt management companies below!
Cambridge Credit Counseling
This firm has a reputation as one of the most prolific debt management companies on the market. While many companies use shady terms and conditions to advertise their product, Cambridge Credit Counseling keeps things straight forward. They provide upfront and affordable debt management plans. They're a suitable option if you want to avoid working with a complicated company.
InCharge Debt Solutions
InCharge is another major debt management company that has plenty to offer clients. Their fees and charges are also outlined clearly for customers to understand. They also provide you with information about how much you may expect to see your interest rates change while using debt management. They're a great company to work with if you want to use a BBB accredited company – you can find user reviews and feedback for InCharge Debt Solutions on the BBB site!
Greenpath Debt Solutions
Greenpath Debt Solutions is another debt management company with BBB accreditation. This is one of the oldest debt management companies in the country. If you're looking for a debt management firm that has decades of experience, you'll find Greenpath Debt Solutions a useful option. The company has brick-and-mortar locations in various states throughout the country. Feel free to meet with a debt counselor at one of their locations.
Advantage Credit Counseling Services
Advantage Credit Counseling services is another debt management company with a long history in the industry – they've been helping clients since the 60s. Like many of the other debt management companies on this list, they're accredited with the BBB as well. The company is a non-profit, which means the organization can't sell financial products for a profit. Aside from their debt management services, they also offer plenty of online resources to help educate their clients.
ClearPoint Credit Counseling
ClearPoint Credit Counseling is another debt management firm from the 1960s – they have plenty of experience helping people escape debt. Best of all, they have a range of different specialties that include niches such as helping you escape student debt. It's a great option if you're looking for a one-stop-shop for your debt management services.
Remember, you should always check consumer watchdog groups before working with a debt management company. It's the best way to ensure you have an up-to-date perception of their customer service record.
Debt Management Basics
In this section, you will find the answers and information for those who are new to the process of debt management. If you don’t know how to get started, find the answers you want below.
What is a debt management plan?
Do debt management plans work?
What is debt management policy?
How does debt management work?
Can you pay off a debt management plan early?
Yes. Debt management plans are typically flexible. You have the option to pay it off earlier than the agreed time period for repayment. Read more about how to pay off debt faster.
Can I cancel my debt management plan?
Can I get a mortgage after DMP?
Does a Debt Management Plan affect getting a mortgage?
How long does a debt management plan affect your credit rating?
How long does debt settlement stay on your credit report?
How do you offer a full and final settlement?
You can write a formal letter addressing your creditors providing details of your proposal. You must offer to settle (in lump sum) a specific amount that is less than the total amount of debt you owe. This process will likely be different for tax debt settlement so become informed about the type of debt you're trying to settle.
Can debts be chased after 6 years?
How long before a debt is written off?
Is it true that after 7 years your credit is clear?
How long can you be legally chased for a debt?
Can you go to jail for unpaid credit card debt?
It varies from one state to another. However, in today’s criminal system, you won’t be going to jail for a “civil debt”, which includes credit card. Consider all your credit card relief options before giving up.
Can I have two debt management plans?
Are debt management companies a good idea?
It depends on your credit situation. But if you feel overwhelmed about your debts and you want to make it easier to manage your credit payments, then you can give them a try. There is also the debt relief company option. For example, learn more about this well reviewed company: How does Freedom Debt Relief work?
Who works with people who are experiencing debt management trouble?
What is public debt management?
How is debt management different from debt consolidation?
Debt management is done with the help of a credit counseling agency. They are responsible for paying your creditors, so you have to pay them on an agreed schedule on a monthly basis. Meanwhile, debt consolidation is done by rolling out several debts into one new loan, allowing you to focus on one monthly payment. Read more about the best debt consolidation programs.
Why is debt management important?
Is a debt management plan right for me?
If you have considered other forms of debt relief such as and had little success with them, it might be worthwhile to consider debt management plan. If this is for a school debt then look at student debt relief reviews.
Can creditors refuse a debt management plan?
What are debt management ratios?
Can I get car finance on a debt management plan?
What is a debt management plan for an individual debtor?
Can a debt management plan help with payday loans?
Yes. A debt management plan can help with unsecured debts, such as payday loans. We've compiled some reviews from around the web about the best companies that can help with this kind of stuff. For example we talk about the National Debt Relief reviews Yelp is showing for the that particular company.
How long does a debt management plan last?
What is the best debt management plan?
Can you get credit on a debt management plan?
Can I do debt management plan myself?
What happens if I stop paying my debt management plan?
What are the negatives of a debt management plan?
How much does a debt management plan cost?
How to improve debt management?
What is a free debt management plan?
Debt Management and Credit Score
Discover how debt management can affect your credit score. You can find a series of commonly asked questions about debt management.
Do debt management plans hurt your credit?
Debt management plan does not hurt your credit. Credit reporting agencies won’t penalize consumers for trying to repay their debts. It can have an impact on your credit but it will not affect your credit score directly. The payment history, amount owed, length of credit history, and inquiries for new credit are what would impact your credit score.
How long does Debt Management stay on your credit report?
Debt management isn’t an overnight solution; however, it does not appear on your credit report. The reduced payments are what will show up on your report. The whole process can take several years, and so does the impact on your credit score.
Can I use my credit card after debt consolidation?
You can still use your credit card after debt consolidation; however, you must be responsible with its use to ensure that you won’t get into debt again. Learn more about how best to use credit card consolidation loans.
How can I consolidate my credit card debt without hurting my credit?
When consolidating your credit card, you can apply for a personal loan. Balance transfer credit card is a good option only if you promise to pay all of your debts within the period of the introductory interest rate. Otherwise, it would not make sense to pay for a higher interest rate. Make sure you pay your newly consolidated loan on time. Learn more: Do debt relief programs hurt your credit?
Do DMPS affect credit rating?
A debt management plan (DMP) can affect your credit rating negatively. But in the long run, it can be better for your credit score as it shows your commitment to paying off your debts.
How can I quickly raise my credit score?
There are several steps to help boost your credit score quickly. First, you will need to clean up your report to ensure that there are no errors that could cause a negative impact. Second, you must attempt to pay down your balance (if you can pay twice a month, you should).
What does debt consolidation do to your credit score?
Consolidating your debts can help you pay off your outstanding balances and prevent delinquency as you are able to make more timely payments. This will help to improve your credit score over time.
Debt Management Company
If you are looking for the best debt management company, you might ask these questions. Discover more information on how to choose the right debt management company.
What is the best debt relief company?
When you are choosing the best debt consolidation company, make sure they meet the following criteria: 1) it should be certified or licensed, 2) check if they have valid customer reviews, and 3) check out their policies and fine print of agreement.
What is a debt management company?
A debt management company will negotiate with creditors and pay them on your behalf. There is no need to work directly with the creditors as the debt management counselors will do that for you.
How do debt management companies work?
Debt management companies consist of counselors that will work on your behalf to reach out to creditors about negotiating your interest rates. It is their goal to help you eliminate any delinquent debts on your account. Learn more about how to pay off credit card debt fast calculator included.
Which debt management company is the best?
The best debt management company will vary according to your unique needs. Their goal is to help you deal with unsecured debts. Choose a company that can provide transparency in their methods, with several years of experience, and have a proven track record.
How to choose a debt management company?
Look for debt management companies that offer free credit counseling. You can use this opportunity to assess their expertise and determine how they can help you. It is also important to look at consumer reviews and the track record of a company before choosing them.
Elizabeth is an expert on Debt Consolidation as she provides helpful advice to people who are dealing with debt problems. She graduated college with a BS in Finance. After college, she took a job working at a non-profit debt counseling program. It was at this position where Elizabeth honed her expertise for helping people understand how different financial products work and finding ways to help people pay off their debts.