Debt Management Programs or Credit Counselling, as they are famously referred to, are the new buzzwords on the market.
The latest Federal Reserve Data puts the cumulative credit card debt at $930 billion in the last quarter of 2019. Housing debt reached $10 trillion and non-housing debt reached $4.20 trillion.
As you can see, debt is a huge problem for many of us. In this guide, we will take a look at Debt Management Programs including what they are and how they can help you.
Debt Management Programs
Under this program, management companies deliberate with your creditors to formulate a plan. The motive is to reduce the ultimate burden of unsecured debt by consolidating the debt into affordable plans.
Credit Counselors can reduce the interest rate and payments. They can also waive or reduce penalties.
Before you go out and let the Credit Counselors develop a consolidated and personalized repayment plan for you, there are many things you will need to consider.
Do It Yourself
It is possible to formulate a debt management plan for yourself. All you need to do is go and talk to your creditor and explain your inability to pay.
You can then ask them to expand the debt for a longer period.
Many creditors will be able to support you. If they cannot offer any help, then it would be advisable to seek a Credit Counselor.
Sometimes, your credit score might see a drop after enrolling in a debt management plan. Of course, it depends on an individual’s circumstances.
If you have current outstanding payments and are late on the previous ones, the chances are that your credit score might increase.
If you are prompt with your current payments, the chances are that your score might drop.
Check Better Business Bureau
To protect yourself from any sort of fraud, always check the company with the Better Business Bureau.
A credible organization will provide you with superlative counseling and help to get you out of the debt trap.
It is always better to do some research into the company first so that you have full confidence in your debt management program.
You Will Benefit from the Consistency of Payments
One of the best aspects of a debt management program is that you will find some stability in your life.
Where a vicious circle of interest, principals, surcharges, and late fees are disruptive to your daily lifestyle, a debt management plan will put all of your debt into one place. This means that you will only have one monthly payment to think about.
Since your payment is fixed on a monthly basis, you can plan ahead and keep aside your disposable income beforehand.
Choosing a Debt Management Program
While you may have doubts about Credit Counseling, it is definitely a good choice if you need to get your payments back on track.
The Counselors might charge a small fee but it is a small price to pay for a calmer and debt-free life.
As a precaution, try to deal with companies that are accredited by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). They have strict guidelines for giving certifications and will help you choose the best company to suit your needs.
The Bottom Line
Debt is a big burden on our lives and can have many negative impacts. If you wish to get you and your family out of debt, you may want to consider a Debt Management Plan. These plans are easy to find and offer a simple way out.
Be sure to do some research to find a plan that’s right for you.