http://www.debtrelieffreedom.com/debt-management/debt-management-programs.html Debt management programs are a great way to get out of debt. en-us Wed, 23 Jul 2008 15:00:00 EDT Wed, 23 Jul 2008 15:00:00 EDT Weblog Editor 2.0 The Magic of Debt Management Programs Ah, debt management programs. They're a magical thing. Why? They can magically make your debt disappear in five years or less, whereas it would take you around 15 or more to do it on your own. So how do they do it? Is it all smoke and mirrors? No. It's done through the magic of reduction. Most debt management programs function by getting you some sort of reduction in interest rates to make them more manageable. A couple of debt management programs can even score you other reductions as well. For example, sometimes a debt management company can get past fees removed (like late fees and over-the-limit fees) when you enroll in a debt consolidation plan. Think about that--if each fee is $20 a pop (minimum) it can add up fast. If those fees are removed and the interest rate is reduced, that's shaving hundreds off of your balance immediately. With debt consolidation, this is done for all your unsecured debts, then they are combined and you pay one monthly payment to the debt consolidation company, which they distribute to your creditors. Debt settlement is a debt management program that also gets you reductions in more than just interest. In fact, with debt settlement, you end up paying less than what you actually owe. A skilled debt settlement counselor can get the amount you owe reduced by 60-80%. However, you have to come up with the amount you owe immediately. Not only that, but your creditors don't like this so they report it to the credit reporting agencies, and it effects your credit in much the same way as a late payment does. Some debt management programs are really just loans to pay off your debt. For example, a debt consolidation loan doesn't get you balance and interest rate reductions, but the interest rate of the loan is much, much lower than what you were probably paying on your outstanding debt. (Usually the interest rates are in the single digits.) Because of this, you can have the loan paid off in about five years. Debt consolidation mortgages are debt management programs that are similar to debt consolidation loans, but they're better. The loan is added to your mortgage, then your mortgage payment goes up slightly. But again, the interest rate on your mortgage is likely to be so low that it's going to save you a lot of money in interest. Plus, you get to write some of your mortgage interest off on your taxes. You might be thinking, "So I pay off all my debt with this loan all at once, but I'm paying off the loan over the life of my mortgage. How does that save me any time?" You sort of answered your own question though. Your unsecured, high-interest debts are paid off immediately. That means you don't spend years paying high interest. The second thought is true, but it's still your best option in debt management programs (if you're a homeowner). Now let's turn to another kind of debt--student loan debt. Student loan payments can get expensive, and the interest rates don't help. But there are debt management programs designed specifically to reduce your monthly payments and interest rates on student loans. They're pretty straightforward. Through student loan debt consolidation, your student loans are all combined, then you're given a much lower interest rate. Your student loan payments are spread out over a greater number of years, so they're cut in half. But sometimes this is necessary to get the payments under control. Let's face it--when you're first out of school, you're not making a ton of money. And if you have huge student loan payments, you may have to put a lot of living expenses on a credit card, which leads to credit card debt, and the need for one of the debt management programs mentioned above! Wed, 23 Jul 2008 15:00:00 EDT