Being in credit card debt can be scary, but it's far from a hopeless scenario. Programs such as debt management are geared toward helping people become debt-free. A common question about debt management programs is what criteria one must meet to sign up for the program.
Debt Management Programs
A debt management program is an alternative to bankruptcy or a debt settlement and is seen as a legitimate alternative to those two options. In a debt management program, you pay all of the balances you owe, but you do so at a drastically reduced interest rate. This break on interest charges is what helps you to pay off your debts far more quickly than you'd be able to do on your own; in fact, most debt management programs aim to get you out of debt within five years.
Minimum Balance Requirements
Some debt management advertisements suggest contacting the company if you have certain amounts of credit card debt, such as $5,000, $10,000 or more. However, most credit counseling agencies have no minimum balance requirements for enrollment in a debt management program. For example, Pioneer Credit Counseling of South Dakota requires just two credit accounts and a source of income to make your monthly payments. Companies that administer debt management programs are usually nonprofit agencies that will work with you as long as they're able to help you get out of debt.
Monthly Contributions
Since debt management companies try to make you debt-free sooner rather than later, you'll be paying off your balances at a much faster rate than you currently are if you're just making your minimum payments. However, the amount of your monthly contributions is usually similar to the amount you're currently paying and may actually be less than your current monthly payments. The reduced interest rates you receive as part of the program enable you to pay more towards your principal and less to compounded interest rates. However, the more you pay each month, the faster you'll pay off your debts. The only way to truly see how much you'd pay on a debt management program is to call a credit counselor and ask for an evaluation.
Living Without Credit
The hardest part of any debt management program is adjusting to life without the credit cards you've relied upon for so long. Enrolling in a debt management program requires that you relinquish your credit cards and that you not open up any new lines of credit. Any cards with a balance will be closed, ensuring that you pay your balances down instead of merely treading water. Once you adjust to getting by without your credit cards, you'll be well on your way to building a better financial future.
0 comments:
Post a Comment