Best Debt Management Program to Manage Your Credits
Unsecured loans such as mortgage or credit card debts can cause trouble to create a good credit report as well as difficulties in improving financial status. All you will be doing is paying up bills consecutively without a secure future, free from loans. To prevent people from such scenarios, credit counseling organizations suggest Debt Management Plans. It saves you from paying significant interest and further going to bankruptcy.
But it is necessary to know how it works, it will be helpful and what are its negative sides.
What is a Debt Management Program?
A debt management program is a constructed payment schedule that is set up by a credit counseling agency and also managed by them. This management plan breaks up credit card debts into a monthly affordable payment solution. Consumers of DMP agree upon stop using credit cards for lower interest rates, which enables them to repay their debts in three to five years easily.
Counseling agencies are usually non-profit organizations, offering assistance to manage finances against a small monthly fee for their services. The process starts with the counselor reviewing consumers’ financial situations, credit reports, and the options they have. If DMP suites debtors, then he negotiates with the creditors and constructs a payment plan. Negotiation is necessary to lower the interest rates so the debtor could be able to pay back in 5 years maximum.
If the debtor is agreed to take DMP, he will have to make a monthly payment to the counseling agency. The agency will distribute the amount among creditors.
Benefits of a Debt Management Plan
It is a sense of relief for debtors who want to find a practical solution. Especially when they are making monthly payments regularly, and the debt is still not decreasing. So when they take a DMP, it benefits them in the following ways.
- Payments become more affordable. Your credit counselor will work with your card companies for the reduction of interest on the credit card debt to make the repay affordable for you. Usually, the interest rate drops from the mid to high 20s down to single digits of around 8%.
- Payments become simple. All you need to do is to write a single cheque, which will cover all the credit payments. There would be no late fee and keeping up with dates.
- You will fully repay all the debts within 3 to 5 years.
- You will stop receiving threatening calls from the collectors after enrolling in DMP.
Cons of Debt Management Program
- It is only applicable to credit cards. It does not include other unsecured debts such as student loans, medical debts. The counselor may provide you with guidance, but you have to manage those loans by yourself.
- You cannot miss a single payment. If you do, you will lose all the concessions the credit card companies made for you.
- You will not be able to use the credit card anymore that is included in the DMP. Also, the creditors may make you stop using the other cards as long as you are enrolled in DMP.
Get Started with the Best Debt Management Program
Have a look at your situation and ask these questions to yourself.
Can I live without a credit card?
Can I take responsibility to make a monthly payment?
Do I need support to manage my debts?
After you get the answers, if you believe that the Debt Management Plan is a suitable solution for you, then you must go with it. Many online organizations are assisting in managing your debt. You just need to find one that can get you out of the debts. For that, do a little research to get the best debt management program.