How to Get a Debt-Management Plan

If you’re in debt crisis or you’re concerned you may be getting close to it, a debt-management plan from a good credit-counseling agency may be just the solution. For a small monthly fee, the agency handles both communications and payments on your behalf, and it includes revised payments that

  • Are acceptable to all your creditors.

  • Leave you enough money to handle your living expenses.

  • Generally get you out of debt in two to five years.

When creditors realize that you can’t meet the original terms of your credit cards or other loan agreements, they also realize that they’re better off working with you through your credit counselor.

Under a debt-management plan, your creditors are likely to be open to a number of solutions that are to your advantage, including

  • Stretching out your payments so that the combination of principal (the amount you originally borrowed) and interest will pay off your balance in 60 months or less.

  • Changing your monthly payments to an amount you can afford to pay.

  • Reducing your interest rate and/or any fees associated with your loan.

  • Stopping creditors from hounding you day and night.

Sounds like a good deal: lower interest rates, smaller payments, and all. Well, the debt-management plan isn’t a free lunch. The minuses may include

  • A possible negative impact on your credit report (although just being in a debt-management plan doesn’t affect your FICO score).

  • An increase in interest rates (unless you pay in full and through the credit-counseling agency you originally signed up with).

  • Restricted access to credit during the term of the plan.

  • Difficulty in changing credit-counseling agencies after you begin a debt-management plan.

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