Debt Management Plan

A debt management plan can help you reduce your monthly payments, lower your interest rates, waive fees, and avoid collection calls. It can also help you pay off your debts faster and improve your credit score over time.

A debt management plan works by negotiating with your creditors to obtain more favorable repayment terms. Once the terms are agreed upon, you make monthly payments to the debt management company, which then distributes the funds to your creditors.

To qualify for a debt management plan, you generally need to have a steady source of income and be facing financial hardship due to your outstanding debts. Different debt management companies may have different eligibility criteria, so it’s essential to check with the specific company before applying.

A debt management plan can help improve your credit score if you consistently make your monthly payments on time and reduce your overall debt.

The length of a debt management plan can vary depending on your specific financial situation and the terms negotiated with your creditors. Generally, debt management plans last between 3-5 years.

A debt management plan may have a short-term negative impact on your credit score, as it may be reported to the credit bureaus as a “debt repayment program.” However, consistently making on-time payments and reducing your overall debt can help improve your credit score over time.

Most unsecured debts, such as credit cards, personal loans, and medical bills, can be included in a debt management plan. However, secured debts, such as mortgages and car loans, usually cannot be included.

Missing a payment on your debt management plan can jeopardize your negotiated repayment terms and may result in your creditors resuming collection efforts. It’s essential to contact your debt management company as soon as possible if you anticipate missing a payment.

In most cases, you will be required to close your credit card accounts while on a debt management plan. This is to help you focus on repaying your existing debts and avoid accumulating new debt.