How to Become Debt Free with A Debt Management Plan in Tennessee

Find a Credit Counseling Agency

You’ll want to do some research before choosing a credit counseling agency. Find a few credit counselors to compare. You’ll want to work with an agency that is an accredited nonprofit organization. If an agency is accredited, they have to meet higher quality standards than for-profit operations and non-accredited entities do. The COA is the organization that does the accrediting. The National Foundation for Credit Counseling, or NFCC, is the longest-running nonprofit financial counseling organization in the United States. NFCC member agencies must be accredited. You can find out whether a credit counseling agency is accredited by visiting the NFCC and COA websites. Additionally, you’ll want to check the credit counseling agency’s reputation with the Tennessee Attorney General’s office and the Better Business Bureau. Look for agencies without significant complaints. Also, take the time to find out about any fees or costs the credit counseling agency might charge. The initial session should always be free. Make sure the agency you choose doesn’t charge you for your free credit counseling session. 

The next step in finding an agency worth your time involves finding out what the agency needs from you prior to your credit counseling session. During your initial credit counseling session, ask your counselor questions. Find out what the agency will do if you can’t afford the fees the agency charges for managing your plan. Ask how the counselor is compensated. Avoid counselors who make a commission or bonus if you sign up. Get some free informational materials from your credit counselor before signing up. These materials will help you review debt relief options before committing to any one course of action. Finally, have your counselor explain what sets them apart from other agencies. Find a counseling agency that offers services that will benefit you. For example, you may want an agency that offers online access to your account or post-counseling services.

What to Expect at Credit Counseling

Before you begin, take the time to prepare for your free credit counseling session. Put together some of your financial information. Look for some recent paycheck stubs. Pull a free copy of your credit report. Gather your credit card bills and medical bills. These statements should include your account number, amount owed, minimum payments, and interest rates. Gather recent bank account statements and figure out your ongoing monthly payments. This information is necessary to get an overview of your financial picture so you can effectively discuss your situation with the counselor. During your credit counseling session, you’ll talk to a certified credit counselor in person or over the phone. Your counseling session will be confidential. This reality allows you to have an open conversation about your financial situation. A free credit counseling session lasts about an hour. During this time, your counselor will assess your finances. You’ll give the counselor an overview of your income, expenses, and debt. You’ll work together to establish long-term and short-term financial goals. You’ll create an action plan to achieve those goals. Depending on your financial situation and your debt relief goals, the credit counseling agency might recommend a debt management program.

Making the Decision & Getting Started

You’ll be making a major commitment if you opt to enter into a Tennessee debt management plan. Even if a credit counselor says that your situation is a good fit for a debt management plan, you’ll want to take your time to decide whether this course of action is right for you. A good credit counseling agency will not pressure you into making a decision. The choice is up to you. Make sure you have all the information about how your debt management plan will operate. Ask the counselor about its set-up fee and monthly fee. Find out if the counselor gets any incentives for signing you up for different options. You don’t want to be pressured because they get a bonus to sign you up. 

You’ll want to honestly determine whether you can stick with a long-term plan. If you’re not good at keeping a budget, you may want to try some alternative debt relief options. You may have to cut spending and other discretionary expenses. Find out if your family is okay with the approach you’re considering. Commit to making the monthly payment on time. Missing payments could result in additional fees or a worsening financial situation. You may even want to investigate other debt relief options available in your area. Depending on your situation, you may want to speak with a bankruptcy attorney. Bankruptcy is a more comprehensive approach to debt relief and it may be the most appropriate option for your situation. If, after exploring your options and weighing the pros and cons of each, you decide to move forward with a DMP, let your credit counselor know so that they can begin negotiating with your creditors.

Put Together Your Tennessee Debt Management Plan 

Your credit counselor will ask for additional information once you commit to a Tennessee debt management plan. For example, your credit counselor might ask for your cardholder agreements from each of your credit card accounts. A cardholder agreement contains the terms and conditions for each credit card. This includes information like interest rates and payment terms. Your credit counseling agency needs to understand any terms that could affect your debt management plan. You can usually find copies on your credit card company’s online portal. You received a cardholder agreement when you were sent your credit card. For sample agreements, check out the Consumer Financial Protection Bureau’s website. 

Working out reasonable terms for your Tennessee DMP will help to ensure that this process is ultimately successful. Work out the details and create a due date that makes sense for you. Get details from your counselor about how often and when plan payments will come due. If allowed, you may be better off making bi-weekly payments that line up with your paydays. After you’ve prepared a workable plan, your creditors will then have a say. Your credit counseling agency will work with your creditors to work out favorable terms whenever possible. Once the details are settled, you’ll start making payments.

Begin Payments

Talk to your credit counselor about your repayment plan amount and the due date for your payment before you finalize the terms of your DMP. Make sure you understand the exact dates and amounts you will pay. Your credit counseling agency will reach out to each of your creditors. It will establish the plan with your creditors and work out agreements with them. Ask your credit counseling agency how long this process will take. Credit counseling agencies have established relationships with these lenders. They should also be able to give you updates as they reach agreements. Stay in contact with your credit counselor throughout the process. After your payments begin, your credit score may initially dip as creditors may begin to close your accounts as part of the Tennessee DMP. Once your total debt decreases, your credit score will begin to rise. The debt management plan may be reflected on your credit report, but it won’t impact your overall score. Keep payments going to continue to build a favorable credit score.

How to Stay Current with Your Tennessee Debt Management Plan

Do everything you can to keep your Tennessee debt management plan payments current. Your due date should be set to a time when you’ll have funds available. Don’t set due dates at the same time that other large monthly expenses (like car loan payments or rent) are due. You should also prepare for unforeseen financial issues that may pop up while you’re paying off your debt management plan. Try to put aside a little bit each month as savings in case of unexpected expenses. Use online budgeting tools to keep you on track. Review the monthly debt management plan reports from your credit counseling agency. Celebrate when you hit important milestones. If you have a financial emergency, let your credit counselor know. If you have to use emergency funds, replenish them as soon as you can. If you need to use a credit card to pay for emergency expenses, pay it off as soon as possible to avoid getting back into debt. Keeping your finances on track will help to ensure that you can make your DMP payments reliably each and every month.