How You Can Get Back on Track with a Debt Management Plan
Are you drowning in credit card bills and past due loan payments? You’re not alone. While it may seem like a never-ending cycle, it is possible to make your way out of debt.
Debt management plans give you immediate relief for looming bills and calls for creditors. We break down how debt management plans can help get you on track to financial freedom.
What is a Debt Management Plan?
A debt management plan (DMP) is a program where a credit counseling agency works with your creditors to negotiate lower payments and interest rates. They also work to waive fees or penalties.
You make monthly payments to the credit counseling agency who then gives the money to your creditors. With a debt management plan, you are usually able to pay off debt in around 3 to 5 years.
A debt management plan is also considered a debt consolidation plan. It reduces the amount of interest and fees paid every month to lenders. Unlike other debt consolidation plans, a DMP doesn’t require you to take out a loan.
Debt management plans are designed for unsecured loans. These include installment debt like personal loans, credit cards, medical bills, and income taxes.
You can’t use a debt management plan for loans with collateral. This means you can’t use a debt management plan for things like mortgage loans and auto loans.
What are the Disadvantages of a Debt Management Plan?
A debt management plan may seem like a dream come true, right? Not really. Although this process can relieve the financial burden, it does come with its downsides. Here are some things to consider before enrolling in a DMP:
1. You May Have to Pay Additional Fees
Most credit counseling agencies charge an up-front fee. Not only that but they can also charge monthly maintenance fees too. You can avoid hidden fees by working with a nonprofit credit agency that will offer their services free of charge.
2. Missed Payments are Detrimental
If you miss a payment, it could derail your progress. Also, your credit score could be negatively impacted.
3. It Doesn’t Change Financial Behavior
While a debt management plan helps to alleviate the financial burden, it doesn’t help you change the habits that got you there. Many people who enroll in a DMP sometimes slip back into debt because some agencies don’t help them address spending habits or behavior.
The team at Kelley Financial Group not only helps you manage your debt but assists you in creating a budget and forming healthy financial habits.
Is a Debt Management Plan Right for You?
If you’re overwhelmed by debt, then consider enrolling in our debt management plan. With over 70 years of combined experience, our team is dedicated to offering solutions that will help bring you closer to financial efficiency.
Ready to meet with our specialists? Contact us!
*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.