Financial debt can be a heavy burden to carry, and unfortunately, it is one that many have to endure. Even those who are incredibly careful with their finances can find themselves in a situation where they have to juggle overwhelming bills and debt collectors due to declining economic issues. Have you ever considered debt management as an option?
If you are one of the thousands of people who find themselves living paycheck to paycheck while putting most of your income towards increasingly high credit card debt, you may be wondering what your options are to get out from under high-interest rates and late fees.
How Does Debt Management Work?
Debt management programs can help you work with your creditors so that you can have some relief from your debt by reducing monthly payments, interest rates, late fees, and even stop collection calls. This article will help guide you through some things you need to understand about debt management programs.
Before you decide on a debt management plan, you need to understand that it is a schedule for payment to your current creditors based on the consolidation of your debt so that you can have monthly payments that are more conducive to your financial state.
This is not a loan, and your credit score is not factored in. Once you have decided on a credit counseling agency, they will work with you to find a manageable payment based on your budget. Once you have an agreed-upon amount, you will make one consolidated payment to the agency, and they will, in turn, pay off your creditors.
In order to enroll in a debt management program, you will be required to participate in counseling sessions that will help you figure out what solution is best for your specific debt issues.
These sessions can run anywhere from 20-50 minutes. The goal of these calls or online assessments is to help you get to the source of your debt and help you create a more manageable budget for you and your family based on your current income.
Once you have discussed a plan and options with your counselor, you can decide if a debt management program is right for you; if so, you can sign up immediately and begin the process of becoming debt-free.
Pros and Cons of Debt Management Programs
- Affordable payment plans
- One consolidated payment
- Fixed timeline for becoming debt free (typically between 3-5 years)
- Easily tracked payments and status updates
- Improved credit score
- No more calls from credit agencies
- It does not apply to student loans, mortgages, or automobile debt
- Cancelation if a payment is missed
- Elimination of all credit cards
- Not all creditors will work with a debt management program
- It is a longer process (3-5 years) to become debt-free
Debt management programs are not for everyone. Based on what kind of debt you are in and your financial situation, it may not be the right path for you; however, if you have a solid, steady income yet are drowning in high-interest credit card payments that you need to get out from under, debt management may be the ideal solution for you.