About Credit Debt Management

Many consumers have too much debt or the inability to pay debt obligations. Credit debt management plans are offered through consumer credit agencies to help individuals gain control of their finances and reduce or eliminate debt. Credit debt management plans cover a variety of financial situations and provide several benefits for consumers who struggle with debt.

Function

Credit debt management involves plans, strategies and programs consumers use to get out of debt or pay off delinquent bills. Consumers typically enroll in debt management plans when creditor accounts pile up and they can no longer meet debt obligations. Credit counseling agencies administer debt management plans and offer recommendations and advice for consumers based on their unique financial situation. Counseling agencies include community-based organizations, non-profits and private institutions.

Types

Credit debt management programs offer unique solutions for a varying types of debt. Most programs help consumers manage unsecured debt, such as credit cards, lines of credit and medical bills. Credit counseling is a type of credit debt management program that helps consumers understand the type of debt they have, formulate a budget and develop a financial plan to pay down debts over time. Credit and debt consolidation is a type of credit debt management program in which consumers consolidate eligible debts and make a single monthly payment toward all debts at once. Debt negotiation is a management program that allows consumers to negotiate lower payments or better terms with creditors to make payments more affordable.

Benefits

Credit debt management is beneficial because it helps consumers organize personal finances. By using debt management services, consumers are able to determine how much debt they are obligated to pay and the actual costs associated with the debt, including fees and interest payments.

Another major benefit of credit debt management is that it helps consumers become debt free. Successful debt management plans help consumers completely eliminate personal debts without accumulating new debt. Consumers emerge with a new understanding of how credit works. They know how to develop and effectively utilize a budget, as well as how to implement responsible spending habits.

Considerations

It is important to note that not all financial situations benefit from credit debt management. Debts such as alimony and child support, certain taxes, judgments and some secured debt may not be eligible for debt management programs. Further, a debt management plan that requires repayment of debts over time may not be an option if a consumer does not have regular income or has very little income. In these instances, the consumer may not be able to afford to make payments.