How to Review Your Debt Management Plan

Debt management plans come in all shapes and sizes. Some are Spartan, listing tenets such as allocating every penny of your disposable income to hacking away at your credit card debt. Others offer some degree of flexibility, allowing you to splurge on a vacation to Europe before your car is paid. Though some plans get rid of your debt faster than others, you must choose the plan that fits best with your lifestyle and income. Reviewing your debt management plan ensures that your financial decisions are best for your unique financial situation.

Instructions

1

Review the credentials of your debt management counselor and of his firm. Bill Westrom, author of the book, Master Your Debt: Slash your Monthly Payments and Become Debt Free, advises asking firms about their many services before deciding on one plan, checking their licenses, reviewing the businesss free literature, inquiring about the nature of the contract required for most debt plans, assessing customer complaints and satisfaction, verifying the fee structure and checking the firms employee compensation figures.

2

Assess the timelines associated with the debt management strategy. This helps you gain an idea of how long the plan will take to be successful: Will you be debt-free in one year? Two? Five years? If you wish to shorten the time span, measure the trade-offs that will be necessary to pay off the debt faster. Such tradeoffs entail larger monthly payments and less flexibility with your disposable income.

3

Review the negatives associated with the plan. Steve Bucci, author of the book, Credit Repair Kit for Dummies, lists downsides including an inability to change credit counseling firms upon beginning a debt plan, limited access to credit and a higher interest rate on the debt balance. Given these negatives, Bucci advises against such management services for those seeking a reduced interest rate or a loan consolidation alternative.

4

Measure the feasibility of alternatives. Play around with your debt management plan figures and check if other methods yield greater cost savings. For instance, check if you can save more money by paying off one credit card with a higher interest rate before another. Ensure you cannot make more money by placing money into an interest-bearing savings account instead of paying off your low-interest student loans. For every financial decision on your debt management plan, verify that it is the most fiscally prudent choice.