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Credit Card Debt Relief Strategies

If you do decide that you want to move forward with debt relief, you'll want to take a close look at your options within the context of your own finances. Depending on the size of your debt, your other financial obligations, and your income, one situation will probably make much more sense than the other; it just comes down to understanding the basics and weighing their associated pros and cons.

With that said, let's take a closer look at some of the debt relief options you may have access to.

Debt Management Plan

A debt management plan (DMP) is a program wherein a debt relief company negotiates with creditors on your behalf to agree on a repayment plan to help you resolve your debt. Typically, the two parties come to an agreement to reduce monthly payments, lower interest rates, minimize or waive penalties, or apply some combination of these measures. If agreed upon, you would them make monthly deposits to your credit counseling organization who would facilitate the payments on your behalf. A debt management plan usually give the indebted party 3-5 years to pay off the balance. 

Advantages of debt management plans:

  • Simplifies your budget and makes paying off debt more manageable
  • Can help you keep organized and on top of bills and deadlines, which can work to improve your credit
  • Settling on a plan can reduce or eliminate contact from debt collectors
Risks of debt management plans:

  • You may not be able to apply for any additional lines of credits while you're enrolled in a debt management plan.
  • If you make late payments while on a DMP, you may fall back into a cycle of debt, and end up in a worse situation.
What to know about debt management plans

Once you've considered the pros and cons of how a debt management plan could work for your finances, you can seek the help of a credit counselor to help you get started. If you and your credit counselor have successfully negotiated a debt management plan with your creditor(s), consider these best practices to keep your outstanding debt in check:

  • Mark down which debts are on a DMP and which ones are not. This will help you better manage your monthly bills and keep track of where your payments are going.
  • Make sure to pay monthly deposits to your credit counseling agency on-time -- there's no need to put additional stress on your finances!
  • Coordinate with your credit counselor to make sure that your debt payments are being made accurately and punctually. Ask for monthly statements to help you verify and keep track of your balances. Not all credit counseling services are created equal so do your due diligence prior to signing up. 
 

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