The key to succeed in any debt relief effort is to come up with a plan that will serve as your guide towards debt freedom. Anyone who is gearing up to deal with their debt problems should anticipate a lot of temptations along the way. You will find a lot of instances that will tempt you to use your debt payments for something other than your debt. These should all be avoided so you can get out of debt as soon as possible.

One of the best plans that you can use is a debt management plan or a DMP. This is a required plan during a debt management program. A debt counselor will be assigned to you to help create it. They will help you implement it too. However, if you want to skip the fees associated with this debt solution, creating your own DMP may prove to help you make your DIY debt relief program possible.

So what can be found in a debt management plan?

First of all, it lists all of your debts. When you work with a professional, you can only include your credit cards, personal loans, and other unsecured debts. Since you are doing this on your own, you can probably include other secured debts in it like your car and home loans. The important thing is to list down all the debts that you want to monitor payments. That is what the DMP will help you accomplish. It will help you manage your debt. When you list your debts, highlight important details like the debt balance, minimum payments and the due date.

After you have accomplished this, determine the amount that is left of your income after your basic living expenses had been paid for. What you have to realize is when you go through this path, you need to have adequate income to support your debt payments. That means there is extra money left after all your basic necessities are paid for. If you do not have this, you may have a hard time with this debt solution. If your income after living expenses are a little short, then you can look at your expenses to see where you can save some more. Or your can grow your income to meet your debt payments. If none of it works, you could be better off with other programs that will aim debt reduction rather than a simple debt management plan.

Another thing that you can do is to negotiate with your creditors. This negotiation is usually only for unsecured debts. Negotiate with them to accept a lower monthly payment in exchange for a longer term. This is best done in writing so you can document all communication efforts with the creditor. Ask them to freeze your account if they have to. Show them the DMP that you created for the debt that you owe them. Start with your credit card debts and then your personal loans until you reach an adequate amount that your income can afford.

The main factor that will make your DMP successful is how you stick with it. If you succeed in lowering your monthly payment with certain creditors, you need to ensure that it will be followed strictly. Otherwise, they may go back to the usual amount that you are required to pay off. That will mess up your budget for the rest of your debts.

If you like the idea of consolidating your debts, you have two options that can serve as your debt relief method. They have differences and similarities and it is important for you to know them so that you can make a smart decision as to how you will solve your debt problems.

Let us discuss them one by one.

Debt consolidation loans is a type of debt relief that uses a big loan amount to pay off everything else that you owe. If you have three card debts worth $2,500 (debt A), $5,000 (debt B) and $10,000 (debt C), you will need at least a $17,500 loan to pay them off. If the $17,500 is approved, you will use it to completely settle debt A-C. That will consolidate your debt amount into the new loan that you just made. With the debt being stretched over 5 years, you can expect a lower monthly payment.

Ideally, you should compute the average interest rate of your other debts. Whatever you have computed will be your ceiling in terms of the interest rate on your new debt. Do not get a loan that will ask you to pay a higher interest than your current average. Usually, the low interest can be achieved by having either one of these: a good credit score or a collateral. Both of these will show that you are a low risk borrower and thus will prompt the lender to give you a low interest rate.

The other type of debt consolidation is known as debt management. Unlike the previous option, this requires the aid of a debt or credit counselor. When you enroll your debts with a credit counseling agency, you will be assigned one and they will look at your finances to see how you can make your debt payments. The counseling part is free. But if you want to take the service further to debt management, you will be asked to pay a fee that is no more than $50 a month. If you have fewer debts, you will pay less in terms of the service fee.

You will begin by creating a debt management plan (DMP) that will serve as your guide throughout the program. This will be custom made to suit your financial capabilities. The counselor will stretch your payments over a longer payment period so you can make lower monthly contributions towards your debts. They will negotiate with your creditor to approve this payment plan and they will guide you until its completion - or at least until you decide to pull out from the program, which is not really advised. Once the creditor accepts the DMP, you will make single payment contributions to the counselor who will distribute the funds to the respective creditors. They will also try to negotiate with the creditor to lower your interest rate - but this usually happens once you are already updated on your payments.

Both of these options, debt consolidation loans and debt management, will require you to have a steady income. Despite a lower monthly payment, there will be no debt reduction on your current balance. The longer terms will see to it that you will be required lower dues.

When choosing between the two, look at the requirement list and see which among the two you can meet. For instance if you have a bad credit score and if you do not have a collateral or you do not want to put it on the line, then debt management is your best option.

Another consideration is the methods. In debt management, all the accounts enrolled in the program cannot be used - this will not happen in debt consolidation loans.