Is Enrolling in a Debt Management Program the Right Solution for You?

Debt management has a stigma in the financial mainstream of being a solution only for those who are in deep financial trouble. However, many people who are far from the brink opt for debt management programs, as the very reason that they exist is to keep a borrower from heading into financial despair. What a borrower has to consider when researching debt management is if the debt management program is right for their financial situation as it exists currently. Below are a few checkpoints to consider if you feel that you may be in the market for a debt management program.

People in debt management programs usually have decent credit scores

A debt management program is usually meant for those with debt of more than $10,000, and some debt management programs actually do have minimums to keep from wasting time on cases that may just require more financial discipline from the individual. However, the debt management program is meant to keep a borrower from having to take drastic hits on a credit score. Because some debt management programs are unsecured reorganizations of debt, a borrower will get a much better deal if he or she has a medium to high credit score.

People in debt management usually have a steady source of income

In order to qualify for many debt management programs, a borrower must have a steady source of income. A restructuring of debt does not necessarily mean that the monthly payment will be forgiven. On the contrary, although sometimes the principal amount may be reduced, a monthly payment or installment will still normally have to be given to creditors. The payments can actually be stretched out so that people using a debt management program can actually increase their credit score, but the payments do have to be paid on time.

Debt management isn't meant to be a crutch

Those borrowers that offer debt management should not have a history of overspending or buying frivolous things on credit cards. Debt management is just that – providing a program of management for debt. This means that the borrower may have to cut back on some luxuries until the debt management program is over. Sometimes, but not often, the debt management program will go beyond discussing debt with the creditors to actually restructuring the budget of the borrower. However, this is a luxury that should not be counted on. The debt management representative should be spending all of his or her time restructuring the debt with the creditor or creditors.

For those who find themselves up against a wall, a debt management program can relieve a lot of stress by lowering monthly payments, and allowing more of that money to go toward the principle. Such programs will affect your credit during the duration of the program, so it's important to carefully consider whether it's the best decision for the circumstance. Ultimately, it's just good to know there are options other than bankruptcy.

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