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Trying a Debt Management Program

September 16th, 2007 · 3 Comments

For those with terrible credit having trouble paying off their debts, there are a variety of credit management programs to choose from. I decided to try out how these programs work, and wanted to put some real numbers to the test. So I was looking for a site that does not require too much personal information to play around with. This debt management program that allows users to evaluate their options seemed perfect, so I took the dive. The Consumer Alliance Processing Corporation Debt Management program seems to be good – it has a BBB affiliation, and seems to be honest.

They have a free debt management quote tool, which is we are most interested in. I filled out the form and the end results looks like the following:
debt management quote

I had plugged in some numbers that I thought to be typical for someone with 30% APR credit cards, choosing a sum below $10,000 for the total debt. I entered a total of 4 cards, with APRs from 20% to 30%, with the outstanding balance on the higher APR cards being about 75% of the total outstanding debt. The free quote tools gives estimates for how much money can be saved. It shows a monthly fee of $35 for the debt management program, but even after this, the total monthly payments are reduced by almost a hundred dollars. The tool also shows that the person can save a total of $18,476 (!!!) by enrolling in the debt management program. I expect this figure is calculated by comparing the total payments made over the lifetime of the debt if one were to pay only the minimum outstanding, to the amounts paid using the debt management program. What’s also interesting is that the monthly APRs are almost halved. If one were to continue making the same payments as before starting on the debt management program, then I suspect the debts will be paid off much sooner.

Debt management programs are not for everyone – of course, if you earn $1000 a month and your financial expenditure is $1200, you won’t find someone to manage your debt. These programs are not for those with less than $3000 in debt, neither are they for those with low APRs on their cards. One of the conditions of the program is that the credit accounts will be cancelled as they are paid off. Once you pay off all the debt, I bet your credit score will improve drastically – enough to get you another card, if you want to play the game all over again!