Debt Management Programs Or Debt Settlement Plans?

Are your debts up to your ears that you do not know what to do? Well, there are a few debt relief options that you can choose from to bring you back to the right financial track.

Credit counseling, debt consolidation, debt management programs and debt settlement plans are alternatives that you can consider before resorting to bankruptcy.

Let's take a brief overview of debt management programs and debt settlement plans. Honestly, no one really wants to choose either of them but sometimes you have to get familiar with them. You know, things do have a habit of happening when you are least prepared. You do have these two debt relief options if things do get bad.

Alright let's look at debt management. Debt management is a program where a certified credit counselor will make negotiations with your various creditors to reduce your monthly payments and interest rates. He will help you work out a monthly repayment that you can afford and you pay it until the debt is gone.

Basically, most credit card companies are willing to work with a debt management program rather then see you go into a collection agency. They will not contact you any longer after you enroll in a debt management program.

There is one catch though. During the course of your debt management program, you cannot apply for new credit of any kind anywhere. This is done to avoid sleazy people taking advatange of the reayment system.  three years to pay back.

Debt settlement is where the debt settlement company will take all of your debts and make you settle for a large lump; each creditor is negotiated to settle for a lower amount, probably fifty percent less that what you original owed.

This will stop adding interest fees but you need to be able to afford the giant lump sum. If you cannot make it, usually you are turned over to a collection agency, or your goods are repossessed.

Now the one major difference between these two options is your credit. If you go with debt management your credit in most cases will be wiped clean and you can start rebuilding it. If you use debt settlement however your credit will be badly damaged and you'll have to start picking up the pieces and superglue them back together.

If both of these debt relief choices are something you do not even want to consider, then keeping all your bills paid down ahead of time is a good way.

You usually won't consider either of them unless you're in financial trouble. Which, if that's the case then you're going to be paying attention to the differences between them. Just remember management equals monthly payment, settlement equals one big lump sum.