How Long Does A Debt Management Plan Take
A debt management plan (DMP) is an easy way to help you tackle your credit card debts. A DMP will have you agree to pay lower monthly payments to creditors, either in person or via phone, email, or both, for a limited time period.
Many times, people with large amounts of credit card debt will need a DMP. This can be due to poor money management, high interest rates, or both. It’s important to look at all of your options before deciding on a course of action, but unfortunately, most individuals don’t because they fear what might happen if they try something new!
Fortunately, there are some things you can do to make sure that a DMP is the best option for you. You may even be able to avoid going through the process by finding out whether or not a DMP is appropriate for you early on. Read on to learn more about how to get started.
Calculate your budget
A good first step in paying off debt is to determine how much money you have available to pay debts. What kind of jobs do you have? Who helps you with rent or mortgage payments? Are there any loans that can be paid off as soon as they are due?
It’s also important to consider what kind of credit you have, such as personal credit cards, mortgages, car loans and more. If you find that you don’t have many opportunities to put away money, this may not be a great time to tackle debt.
In fact, staying indebted just gives you additional reasons to spend! Keeping up recurring monthly spending habits will make it even harder to save later. It's all too common to hear stories where someone spent lots of money on expensive vacations, bills and other things while their savings were almost nonexistent.
If you need help putting aside some cash, discuss these issues with friends and family so that people can understand why you're trying to improve your financial situation.
Create a plan
The next step in debt management is creating your debt management program (DMP) or, as it’s more commonly known, a credit counseling service.
Most credit card companies have a third-party vendor that handles DMP services for them. This company will work with you to develop a payment strategy, establish monthly targets, and negotiate lower interest rates and fees.
Some vendors also offer budgeting tips and tools to help you track your spending. This can be done manually or using an app designed to do this for you.
Budgeting apps like Mint and You Budget allow for input of daily, weekly, and monthly transactions which can then be analyzed and suggested courses of action.
By having someone else handle financial responsibilities, you give yourself time to focus on other things. It also helps mitigate stress, since you no longer need to worry about money.
A good DMP will also assist you in getting back into debt saving mode once they have paid off all of your high balance accounts.
Track your progress
The next step in debt management is tracking your progress! This can be done through various apps, software, or services that track your payments every day, weekly, monthly, or yearly.
Some of the most common applications for this are QuickBooks Online, Mint, Credit Karma, and FreeCreditReport.com.
You should check all three to make sure your creditors do not have it and see what payment information they have access too. Some credit card companies automatically upload transaction data from your card into their system, but some don’t.
QuickPayment System by PaySimple is an excellent free tool to use while you are working on paying off your debts. Not only does it keep tabs on how much money you spend each month, it also keeps notes about why you spent money and whether or not those reasons were valid. All paid for items show up with a description so you know what was bought and who sold it to you!
This gives you more insight as to where your money goes and if anything seems out of place, you can investigate harder. Was there really no reason to buy that thing? Were people trying to scam you out of money?
By using these tools, you will get a clear picture of just how close you are to having a good financial situation.
Many credit repair companies have you pay them upfront to begin services, which is totally fine if you are able to afford it. But what many people don’t realize is that this initial payment also covers their monthly fees!
Debt management professionals help you take back control of your money by paying off your creditors for you. This way, you no longer need to worry about chasing down debts or finding ways to make ends meet while trying to do so.
A professional debt counselor will go into battle for you! They can handle all of your creditor calls, messages, and conversations, as well as negotiate with lenders on your behalf.
There are two main types of debt counseling: budgeting and repayment strategies. A lot of organizations offer both.
Budgeting counselors help you get rid of excessive spending habits. By learning how to live within your means, you start investing in things like nutritious food, clothes, and shelter instead of buying expensive junk.
Repayment strategies work to clear up bad credit by negotiating lower balances on loans. Once they’re paid off, lenders give your good credit a chance to shine!
How long does it take for a debt management plan to succeed? That depends on each individual person and situation, but our experts say it’s possible to stay enrolled in your current program for at least six months after completing all treatments.
Consider a consolidation loan
A debt management plan (or budgeting program) is not for every person, but it can be helpful to some. This usually involves you pay off one outstanding creditor with a lower interest rate in exchange for your creditors agreeing to accept a smaller amount of money owed.
A debt management plan is typically a few months long and sometimes there’s a fee involved depending on what kind of credit card company you have.
But many people have success using a professional services provider that offers this as an option.
You could also choose to do it yourself if you are very organized. It takes just about everyone different lengths of time so there isn’t really a universal answer here.
What we will tell you though is that paying more attention to other areas of your life will help you focus on getting rid of debt.
Running out and buying something because you think you should will only make your situation worse.
Consolidate your debt
One of the biggest reasons people get stuck in debt is they spend more money than their income, which leads to higher credit card balances and loans.
A debt management plan (DMP) can help you take back control of your finances by asking creditors to work with you to pay off your debts at a set payment schedule.
There are two main types of DMPs: negotiated repayment plans and direct payoff programs.
Negotiated repayment plans require you to negotiate with each creditor as to how you’ll pay down your debt. This way, you don’t have to worry about what kind of deal each individual lender offers.
Direct payoff programs go one step further and ask creditors to forgive part or all of the balance owed. Not only does this make it easier for you to repay your debts, but it also helps them win back their investment.
Both types of DMPs usually start off with you paying off some money every month while keeping track of everything yourself. As you earn more money, you increase your payments until you've got rid of the debt completely.
In both cases, there's a grace period where you won't be required to make any additional payments while the program gets going. During this time, however, you will need to continue tracking your spending so that you don't run out of money before the end of the plan.
Create a budget
After you have determined that you can afford to pay off some of your debts, you will need to create a budget! This is an important step in debt management because it helps you determine how much money you have coming in (interest) and going out (debt payments).
You will want to include what costs are recurring (like a job or housekeeping help), what bills must be paid monthly (utilities like phone, internet, and home insurance), and what expenses occur less frequently (groceries, entertainment, etc.). It is very common to forget about these items when we are spending lots of money, so this is where a budget comes into play.
By having a budget, you will know if there is enough money for all of your commitments. More importantly, you will recognize overspending patterns which may lead to more expensive mistakes later on.
Learn to be proactive with your spending
A second way to get rid of debt quickly is to simply learn how to be more conscious about what you spend your money on.
We all have those people that seem to live beyond their means. You would think they made enough money, but you’d be wrong. They are living expensively because they don’t understand the cost of every item they purchase.
If someone who lives paycheck-to-paycheck spends $200 on food, it doesn’t matter how much savings they have, they just spent the most money on food this week. It is important to know how much everything costs so you can control yourself.
There are many ways to do this. Some say buying cheap merchandise is a good way to save some cash, but I wouldn’t necessarily agree with that. Why waste your hard earned money on something that will eventually break?
You should strive to buy things that are durable unless you know them to be lasting quality products. Buying low end products may help you feel better about yourself, but it won’t accomplish anything else.