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What is a debt management program?

Debt management programs can help you get out of debt faster.  Graham Oliver / Getty Images

Are you dealing with high interest debt that only seems to grow with time? Are you looking for ways to get out of it? If so, you're not alone. In fact, recent statistics from the Federal Reserve Bank of New York show that about one in five credit cards is maxed out and nearly 9% of Americans who owe money to credit card companies are delinquent. And, credit card debt may not be the only type of high interest debt you're dealing with right now. 

Though, high interest revolving debts may make you feel like you'll be dealing with them forever, that doesn't have to be the case. One way you may be able to get out of debt in a reasonable amount of time is with a debt management program. But, what exactly is a debt management program and how can it help you eliminate your high interest debt? Before getting started, it helps to understand the nuances of this unique program.

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What is a debt management program?

Debt management programs are a form of debt relief service that are designed to help you better manage your high interest debts - and pay them off as quickly as possible. While each servicer's debt management program is unique, they typically follow the uniform steps to help their clients eliminate debt: 

  1. Financial assessment: The first step to a debt management program is typically a financial assessment. During this assessment, an expert will ask you questions about your debt and overall financial picture to get a better understanding of how they can help. 
  2. Negotiations: Next, skilled negotiators will typically reach out to your lenders in an effort to reduce your interest rates - effectively reducing the monthly and overall cost of your debt.   
  3. Payment plan creation: Once your debt management provider completes negotiations, they'll usually work with you to create a reasonable payment plan. The payment plan should get you out of debt as quickly as possible without stretching your budget too far. 
  4. Payments: After agreeing to your payment plan, you'll usually send a single monthly payment to your debt management provider. They'll divide your overall payment into individual payments and send those individual payments to your lenders as agreed. 
  5. Debt freedom: When you've made all your payments as part of your debt management plan, the plan will end and your debt will be behind you. Now, it's time to adjust your spending habits to make sure you don't have to deal with high interest debts in the future. 

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Why a debt management program may be beneficial

There are several reasons a debt management program may be beneficial. Here are some of the most important: 

  • Guidance: It can be easy to build up significant balances on credit cards and other high interest accounts. But paying those accounts off can be difficult on your own. Debt management programs provide expert guidance through every step of the debt payoff process - helping you stay on track and effectively eliminate your debts.
  • Time: It can take decades to pay high interest debt off on your own - especially if you're only making minimum payments. However, when you work with a debt management program, you may be able to get out of debt in a few years. 
  • Savings: Debt management programs typically save their clients money in two ways: through interest negotiations and through the creation of effective payment plans. Depending on the size of your debt, and the interest rates you pay, you could save thousands of dollars in the payoff process with the help of a debt management program, especially when compared to making minimum payments on your own.  

The bottom line

Debt management programs are a viable way to get out of debt. Not only do they provide expert guidance in how to deal with your high interest debts, they may be able to reduce your interest rates and save you meaningful amounts of time and money. Get in touch with a debt relief expert now to discuss your debt management options

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