Credit Report Blog
Website CertifiedPrivacy Protected

Debt Management Plan – A Closer Look

By Ruth Racey
Published: Monday, October 26th, 2009

Americans hate waking up everyday thinking about debts and the collection agents that haunt them every minute of their busy lives. They hope to get rid of all of these without resorting to filing bankruptcy, which leaves a very low rating on their credit reports. If you are one of these people, you might want to consider having a debt-management plan. It could be the “Knight in Shining Armor” that you are waiting for. It is more than a simple action plan and it offers all the benefits that a debt consolidation plan or an interest-rate-reduction plan can give.

For a small monthly fee that you pay to a credit counselor (who acts as an intermediary between you and your creditors and handles payments on your behalf), your payment terms will be revised for you to handle it without compromising your living expenses. This will be acceptable on the part of your creditors because they will realize that you are no longer capable of paying in the original terms of your credit cards. If you declare bankruptcy instead of this, they will share the negative effects as well because they will no longer get their money back.

Under this plan, you will be receiving a number of solutions offered by credit companies themselves. How good is that? Now they will be willing to listen and compromise with you through your credit counselor. One good thing about this is that your monthly payments are going to be made more affordable plus your creditors will be stretching out your payment to cover the principal amount and interest, so that you will be able to pay the balance in less than 60 months.

Nothing is free in the financial world though. Everything has a price just like any other meal, so you should think about the consequences before making a decision. Among the few cutbacks are the following: 1) Restrictions on using your credit cards during the term of plan. 2) A possible risk of having a negative impact on your credit report. 3) Possibility of having higher interest rates to pay (unless you paid it in full through the credit counselor that you originally signed up for). 4) It will be very hard to change from one credit counseling agency to another. Thus, before you go on, look for the ones whom you think is most reliable.

Different kinds of problems require different sets of solutions. This plan is best intended for those who want to be free from suffering a debt crisis, or someone who is close to having one. If you are simply looking for interest-rate reduction or a consolidation-loan alternative, then you might have to think twice.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.