If you are struggling with your debts, to pay credit card bills every month but can’t seem to get any help, a debt management plan might help. You make a single payment to a credit counseling agency, which then pays your creditors on your behalf to finish your debts.
A debt management plan won’t cut the amount of debt that you owe, but it might result in lower payments overall.
A debt management plan usually lasts from three to five years only.
A debt management plan is not a loan. In a typical program, debt management companies work with creditors on your behalf to reduce your debts and monthly payment and interest rates on your debt and waive or reduce any penalties.
A debt management plan are designed to help people regain control of their finances while reducing unsecured debts. An unsecured debt is the one which is not backed by collateral, and includes credit cards, medical bills and student loans.
It is one of the several ways by which you can take control of your debt and credits and reduces the number of payments you make each month and also save you money in interest and fees.
Those who enroll with debt management plan makes the monthly deposits with a credit counseling organization, which then is used to pay the debts according to a predetermined payment schedule developed by the counselor and creditors.
Your monthly payment is decided to what the customer can afford, and you know before agreeing to take part in the program what that monthly amount is. The complete analysis of household income vs. expenditures determines the monthly payment.
Expect a credit counselor to go over your financial situation thoroughly and to discuss several options about it, not just a debt management plan. Don’t feel pressured to sign up for the plan on the same day a program is offered. Take your proper time to think about it.
You’ll likely to pay an enrollment fee as well as a monthly fee for each credit account in the plan.
Secured debts, such as those for houses and cars, are not covered under it. Student loans are not covered, either specially for the students of the UK. Unsecured debts, such as credit cards and personal loans are covered under it.
The counselor will contact each creditor personally to notify it of the debt management plan and make itself the payer on your account. The counselor may seek some concessions from each creditor, which can include lower interest rates, lower monthly payments.
Each month, your all payments will go electronically to the counseling agency, which pays your creditors. You get a progress report after that for each month.
You should always be prepared to live without credit cards for as long as you’re in the program. Mostly the credit card issuers will require that the account be closed. You may be allowed to keep a card for emergencies or business, and though ask before you sign up.
You should expect to make all your payments on time, every time. The creditors have given you some major concessions, and they tend to insist on you meeting their terms. One missed payment from you and they may be done with waiving fees and charging less interest.