How Much Does A Debt Management Plan Cost? DMP Fees
Debt relief companies have different specializations, such as settlement or consolidation. Depending on your financial situation, your needs may fall into either category; or a combination of both. Understanding what each specialization does can help you determine the right program for your needs.
Debt Relief through Consolidation, Negotiation and Settlement
A specific service debt settlement companies often provide is to professionally negotiate a settlement with a creditor using a one-time, lump sum payment. This permanently resolves the outstanding debt at a discount to the customer. This type of program is typically used with larger debts and requires that the debtor have significant resources available to make the payment. Often, a debt consolidation loan is necessary to access this type of service.
For multiple and smaller debts, consolidation is usually the smarter option and does not require significant resources initially to get started in a program. Consolidation combines a person’s payments into one lump-sum monthly amount, and lowers the interest rates. The debts are paid off quicker, as they are no longer accumulating high interest or fees from the creditor. Creditors are notified that the debtor is in a program and that a resolution of the debt is immanent. Money that will be used to negotiate and resolve the debt are accumulated in a FDIC Insured Special Purpose Account, until such a time as they are sufficient to resolve the debt – at a lower rate.
Determining a Debt Relief Strategy and Company
Once you’ve determined the right program for your financial needs, it is time to contact a reputable debt management company and start finding out what they can do for your situation. Many companies can provide both consolidation and negotiation services.
The Federal Trade Commission has requirements determining how debt management companies can legally charge fees and when they may be charged. Any company attempting to obtain a fee before service is rendered is in violation of the FTC requirements and should be reported to the consumer watchdog organization.
Legitimate companies will charge their fee once they have received an offer from the company and you agree to that offer.
Depending on the type of offer and the size of the debt, in addition to the company, these fees can vary in cost. In many cases, they are based as a percentage of the debt settlement or consolidation savings over the life of the debt. These calculations may be determined using the most recent statements from the companies, the current balances, and interest rates.
The more you save, incrementally the more you’ll pay in DMP fees, but you’ll still save far more than paying the balances in full to the creditors.
In fewer cases, companies will charge a flat fee for services once they are rendered. These fees will be told upfront and may possibly be negotiable with the representative. The fees are typically added to the settlement or consolidation total. Different companies will have different methods for determining the fees, and how they allow their representatives to handle them. If you are in doubt about the way a company is charging fees for debt management programs, ask the representative how the company handles fees. You can also use this information beforehand to help you find the right debt management program for your situation.
Final Thoughts on Debt Consolidation Fees and Services
Don’t let the fees stop you from using a debt management program, whether it is consolidation, settlement or credit counseling. In comparison, these fees are usually much lower than the interest rates and fees charged by companies for being late or behind on your payments. The low fees you pay for resolution of your debt problems are significant savings compared to the full valuation of the balances you’d pay to the creditors.
When faced with debt, the last thing one wants to do is admit there is a problem. Asking for help from another person can be extremely difficult. People live in denial that there is a problem, or that the problem is as bad as it really is. Once people can admit to themselves that they need financial assistance, the biggest hurdle toward financial independence is cleared.
The next step is to determine what sort of help is needed and how to achieve your goals.
You can find financial freedom from crippling debt obligations.If you are in need of financial help, a small, manageable fee should not keep you from seeking the help that you truly need.