Debt Management Plan – Is it Right For You?
Getting a debt management plan can be a great way to get your finances in order. It can help you manage your credit cards, eliminate debt and set up a budget that is easy to follow. In some cases, these plans will lower your interest rate and allow you to save money for emergencies. However, you should not just jump into a debt management plan without researching your options first.
A debt management plan is a legal agreement that outlines terms of the debts you owe. This can include credit cards, personal loans, and overdrafts. A credit counselor will help you negotiate with your creditors to reduce interest rates and penalties.
The debt management plan will cost you a small set-up fee and a monthly maintenance fee. The fee may be a percentage of your payment, a flat fee, or a combination of both. Typically, you will pay less than $50 per month. A debt management plan is designed for people who have high interest unsecured debts, such as credit card balances.
If you have been behind on your payments, a debt management plan can be a good way to start catching up. Your credit score will likely increase after six to eight months of on-time payments. However, you may experience a decrease in your credit score during the first month or two of the program. This is because you will be closing some of your credit cards. The credit counselor will arrange for automatic payments to be made from your account to your creditors.
A debt management plan will help you reduce your interest rate and eliminate your debt. However, it will also require you to live within your means and break your habit of using credit cards. You may not be able to apply for new credit cards while on a debt management plan.
A debt management plan is not for everyone. If you are in dire financial straits, you may want to consider bankruptcy. However, if you are in relatively good shape, a debt management plan may be a good option for you. Typically, a debt management plan can take up to 48 months to complete. It is important to note that a debt management plan may not be available if your credit report is bad.
Some debt management plans are free. However, it is important to find an organization that is legitimate and reputable. You should also look into the fine print to make sure that your fees are capped or waived. You should also check that the debt management plan you are considering is authorised by the Financial Conduct Authority.
If you are unable to make payments, your debt management plan may be cancelled. You may also lose lowered fees and interest rates if you miss payments. It is important to keep track of your progress by reviewing your statements, keeping a budget, and keeping an eye on your credit score. The more you do, the more likely it will be that you are able to achieve your debt goals.
Debt Management Plan – Is it Right For You? was first seen on Debt Worries