Debt Management 101: What's a Debt Management Plan?
When payments, debts, and fees become more than you can handle, a debt management plan prepared by a seasoned consumer credit counselor can help. At American Financial Solutions, we specialize in debt management services for consumers in significant debt. Learn more about debt management and the advantages of enrolling in this type of debt-relief program.
- Getting started with a debt management plan is easier than you think.
- Debt consolidation programs are different from debt management plans.
- Financial education should be an important part of the equation.
What Is Debt Management?
Debt management services can help individuals struggling with debt get back on track. Generally, a debt management plan doesn’t reduce the amount you owe – it simply makes it easier for you to pay it off in a set timeframe. Under this approach, you pay your credit counseling organization each month and they distribute your payments to your creditors.
You can include several forms of debt in this plan, such as:
- Credit cards,
- Collection accounts,
- Medical bills,
- Unsecured loans, and
- Other unsecured debt.
It may seem like debt management and debt consolidation are the same, but they're not. Debt consolidation involves rolling all your existing debt into a new loan. This may be done through a personal loan, secured loan, or another solution. Debt consolidation can also involve transferring several balances to a new low-interest credit card.
American Financial Solutions is not a debt consolidation loan company – we will never require you to take out a loan to pay off your debts. We educate and advise our clients to help them work toward a better financial foundation.
How Can I Benefit from a Debt Management Plan?
A debt management plan from American Financial Solutions will consolidate all your debt payments into one convenient monthly payment. We'll also help you get the following benefits from most of your creditors:
- Lower payments,
- Waived fees,
- Low-interest rates, and
- No more collection calls.
This plan can help you become debt free in 5 years or less. Best of all, you'll be backed by the support of our professional counselors every step of the way.
Do Debt Management Plans Affect Credit Scores?
Another advantage is that enrollment in a debt management plan won’t in and of itself impact your credit score. Plus, you don't have to meet a minimum score requirement to apply. It’s an excellent option for those seeking to retain or rebuild their credit.
Who Is a Good Candidate for a Debt Management Plan?
A good candidate for a debt management plan is not just someone who's having trouble making minimum payments. Another indicator is a high debt-to-income ratio (DTI). This measures how much of your income is used in debt repayment each month.
Many lenders take this metric as a sign of whether you can realistically repay a loan. Along with poor credit, a higher DTI can automatically exclude people from many DIY debt consolidation options available to consumers.
A good candidate for a debt management plan is also someone who:
- May have fallen behind and can't make minimum payments due to fee accumulation.
- Possesses more debt than they can reasonably consolidate.
- Are credit challenged, and struggling with a poor credit score rating.
- Can afford payment each month to a debt management plan.
- Are dedicated to becoming debt free.
Keep in mind that there is no one right financial solution for everyone. Bad credit, overextension, and similar issues don’t automatically qualify a debt management plan as the solution. Additionally, some people don't need to enroll in a debt management plan to reach the light at the end of the tunnel. They simply end up following an action plan outlined by their counselor using sound strategies for success.
Qualifications to Consider When Applying for Debt Relief
Before partnering with an agency providing debt management programs, consider their qualifications and benefits, such as:
Credit Counseling Expertise
When applying for debt relief, it's essential to partner with an agency you trust. The organization you choose should have your best interests at heart and be experienced in financial management.
Part of the North Seattle Community College Foundation, American Financial Solutions is a registered, 501(c) 3 non-profit agency. We abide by the best practices set by the National Foundation for Credit Counseling (NFCC). We're also in good standing with the Better Business Bureau (BBB).
The other key element to consider is the amount of financial insight you'll gain. This helps ensure you have the tools you need to successfully manage your finances for the duration of your debt relief program and beyond.
Consumer education and empowerment are paramount at our organization. We provide an array of educational tools to help you create a financial plan and prevent credit problems down the road.
Our website also offers a wealth of resources and valuable information about debt management programs and consumer rights. This includes video classes covering several common topics for adults and young people, like reading a credit report and developing a sustainable budget.
How a Debt Management Plan Works: A Step-by-Step Process
The first step is to reach out for a debt management consultation with American Financial Solutions. This call only takes about an hour, but a counselor will take all the time you need to discuss your situation. Your conversation with our non-profit credit counseling agency is completely confidential.
To gain a well-rounded view of your circumstances, your credit counselor will review several details, including:
- Monthly expenses.
- Short- and long-term financial goals.
- Your credit report and score (through a free, no-impact credit pull).
Next, they’ll discuss consolidating your bills into one affordable monthly payment through our Debt Management Plan. This helps make managing debt from several sources simpler. Additionally, we work with creditors to take the following steps:
- Bring your accounts current.
- Remove late and over-the-limit fees.
- Lower your overall interest rates.
Your counselor may also recommend additional solutions in follow-up sessions, such as referrals from our resources center and alternative payment strategies. From here, you can start with a clean slate and take measurable strides toward debt relief.
How to Get Started with Our Debt Management Plan
Financial freedom is only a phone call away – simply reach out to American Financial Solutions for support. One of our certified credit counselors will review your entire financial situation. We'll help you prepare a detailed budget listing your income, expenses, and debt. Then, we'll discuss the debt relief options that may work best for you.
If you decide on a debt management program, we will structure a plan that helps you repay creditors on terms that work within your budget. Plus, all your debt will be consolidated into just one payment per month on a day you choose.
A Word from American Financial Solutions
We understand how difficult it is for many people to seek credit counseling services in the face of overwhelming financial hardship. But know that you're not alone. Millions of people struggle with debt every day – they just need a little advice, some hope, and a plan to get back on track.
Our certified credit counselors are a team of well-trained, non-judgmental professionals. We will analyze your financial situation through a compassionate lens. Plus, you'll always be partnered with the same trusted counselor, so you'll only need to tell your story once.