Why a Debt Management Plan Might Be the Key to Solving Your Debt Issues?

Do you feel frustrated paying back your debts? Are several bills mounting up on your table? Are high interest rates increasing your worries?

Do not be a sad head, there is a solution. You may have heard the term – Debt Management Plan. Well, it’s the solution to all your issues with debt. This is a very vital step towards debt freedom as it helps one manage his debts efficiently. Let us look at how it works and why you should consider enrolling in it.

What is a Debt Management Plan?

Before taking the next steps, it is important to be educated about the clear set up of a Debt Management Plan. A DMP is one method or one tool that helps the borrower to clear unsecured debts, credit cards, medical expenses, personal loans, repairs for cars, groceries and consumption use, i.e., practically everything from utilities to groceries.

A qualified credit counselor will assess your financial status and negotiate with your creditors to create one straightforward repayment method that will incur lower fees and interest rates. Henceforth, you will make a monthly payment to the credit counseling agency that will distribute the funds to the creditors.

How Do Debt Management Plans Work?

These steps are included in a DMP:

Review Your Finances

With you, the credit counselor will access your income, expenditure, and overall financial liability. A realistic budget shall be set by both of you and how much you two can contribute toward the monthly repayment shall be determined.

Crack a Deal with Your Creditors

The counselor will call the creditors and count on their response to interest rate reductions, fee waivers, or new repayment patterns. Most creditors are willing to enter negotiations when a DMP subscriber goes into it because that action clearly suggests a positive intention to pay off liabilities.

Make One Monthly Payment

You will now send one check every month to the credit counseling agency for distributing the money between your creditors. There won’t be any need to juggle multiple due dates and accounts.

Pay Off Your Debt over Time

Usually, DMPs last for 3 to 5 years, depending upon the total debt incurred and the amount one can pay every month. In this period, progress would be towards a stage of being debt-free.

Why Opt For a Debt Management Plan?

You should opt for a DMP because of the following advantages:

1. Lower Interest Rates and Fees

DMPs generally grant borrowers a discount in the interest it charges on the consumer loans, waives off certain late fees, which practically means savings, sometimes a few thousand dollars over the lifetime of repayment and reduces the difficulty in paying down balance.

2. Professional Support

Debt can feel very lonely, but the debt expert gives you guidance through contact with a credit counselor trained to work with you as you walk that path. It acts as a mediator for creditors to help you learn how to manage personal finance tools better.

3. Easy Monthly Payments

One of the most difficult aspects of managing debt is keeping track of all those money transfers that are supposed to come every month. DMP will however allow you to make just one monthly payment, thus simplifying keeping track of payment dates and remaining organized.

4. Avoiding Bankruptcy

If you think your problem is so huge that bankruptcy is really the only option, then by all means consider it. You probably should investigate the possibility of working toward a DMP, because bankruptcy causes great long-term consequences for your credit report. DMP allows you to relieve your debt without incurring serious credit consequences over time.

5. A Clear Path to Debt Freedom

It has been written that this is as opposed to minimum payments which merely dent the surface of a balance. A DMP provides you with a way of ensuring that you pay off every single penny from your debt. It is worth all that effort when finally debt-free to experience that huge relief and amazing accomplishment.

Things to Consider Before Enrolling in a DMP

Before committing to a Debt Management Plan, keep these points in mind:

It Covers Unsecured Debt Only

A DMP doesn’t cover secured debts like car loans or mortgages. You’ll need to continue paying those separately.

Short-Term Credit Impact

Joining a Debt Management Plan may reduce your credit score because creditors may mark this on your credit report. However, as you pay off your debts, expect your credit score to improve.

Commitment is Key

A DMP requires dedication. You should follow the plan closely and avoid taking on new debt during the repayment period.

Fees May Apply

Most credit counseling agencies charge a small setup fee and monthly service fee. Be sure to understand the costs before enrolling.

Take Control of Your Debt Today

An avalanche of debt may seem insurmountable, but a Debt Management Plan offers the flexibility and assistance needed to conquer such a daunting summit. In other words, it helps you carry out your payments, takes the weight off your financial shoulders, and leads you straight into a tomorrow that’s free from debt.

When you’re ready to take control of your finances, start contacting a reputable credit counseling agency. They will help you explore your possibilities and determine if a DMP is the best course of action for you.

Given the correct set of strategies, you’re able to have a debt-free life and begin a financially independent journey. Start today – it will help you thank your future self.