A high debt-to-income ratio or fundamental change of personal circumstances (unemployment, divorce or poor health) can mean that paying off debt at a rate that complies with the T&C's of a credit agreement is virtually impossible. Those in need of debt-free help regularly turn to a Debt Management Program because it becomes possible to repay the money owed at an affordable and sustainable rate.
Debt Management Program - Debt Free Help
Following a budgetary analysis, the intermediary will work closely with the client to establish a comfortable payment that can be made each month. Rather than making lots of different payments to creditors, a single payment is sent to the credit debt solution provider. They will then distribute the money to creditors on a pro rata basis.It is important to understand that not all types of debt can be included in the arrangement.
A Credit Debt Solution for Unsecured Debt
It is possible to include the majority of personal debt, including unpaid credit card debt, medical bills, repossession deficiencies, small loans and certain household bills. However, student loans, secured debt, car loans, alimony and taxes owed to the IRS cannot be included. These personal debts will have to be paid outside of any voluntary arrangement.
Paying Off Debt with a Credit Debt Solution
A Debt Management Program is not a legally binding contract so it can be terminated by any of the parties involved at any time. The principal (the amount owed) will not be reduced so payments will continue until the debt is completely paid off. However, the majority of creditors will stop charging interest and late payment charges to help and encourage the borrower to keep up with a repayment plan.
How a Debt Management Program Can Prevent Creditor Contact
The majority of creditors appreciate that customers can experience financial difficulties. The two greatest concerns they have are that the debt will lapse under the Statute of Limitations or the customer will file for chapter 7 bankruptcy. When a debtor defaults on an agreement, the account is normally sold to a collection agency for as little as 10 cents in the dollar. A credit debt solution allows a collection agency to recover their investment. All creditor contact is handled by the intermediary.
Alternative Credit Debt Solution for Paying Off Debt
A Debt Management Program can alleviate financial difficulties and free-up money to pay essential bills. Unlike a debt settlement plan, there is no reduction to the principal so it will take a long time before the debt is completely cleared. It is always advisable to seek debt free help from a credit counselor when facing money problems in order that the right credit debt solution can be identified.
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