With debt management programs, it is easy for someone who is in debt to repay it. The importance of debt management plan can be a lifesaver for those who are deeply stuck in a debt trap. Debt management plans- also called DMP, Debt Solution Plan or debt counselling- are now-a-days booming in the market as they turn out to be a vital and affordable solution to get out of the debt trap.
These plans are the most tempting and affordable way to get out of debt and stay on top of their financial concerns. But what exactly is a debt management plan? What is the importance of a debt management plan? How will it help you to repay? These are some of the questions people ask about how the debt management plan operates. Let us understand.
Before you’re considering a debt management plan, it is important to know how it can affect you in several ways. It is advisable to consult a debt advisor who can help you with a debt solution.
What is a debt management plan?
Debt management plans are a gateway for you to repay your unsecured debt like credit cards or personal loans. In this plan, we offer you an affordable way to repay your monthly payment. A debt management plan is not a loan, it is a solution given to the debtors to repay their unsecured loan at an affordable amount to your creditors.
In a debt management plan, people can pay off their unsecured debts at an affordable price and become debt free through a program offered by debt management companies. Secured debts, like mortgages, car loans, and home loans, do not qualify for debt management plans.
Once you decide to repay your debts with a debt management plan, the company will work with you to get information about your entire financial situation. This includes the amount of debt you owe, your income and your expenditure.
Once you’re cleared with the concept, the advisor will first determine your disposable income from which you will be paying your debts. Initially, your account manager will work with your lenders to make an agreement to accept a lower monthly amount to repay your debts. In accordance with your agreement with your lender for a monthly payment, you’ll start making your payment to your account manager.
During the first and second month of service, the disposable income is used for the administration and legal fees to set the plan up. From the third month, your disposable income is distributed to your creditors. In most cases, a snow-ball payment structure takes place, whereas the lowest debt is paid of first with minimum payments paid to the other debts. The amount of time you’ll take to pay off your debt depends on your plan. If you are on a debt management plan, it is very important to make every payment on time. A late payment or one missed payment can mean a higher interest rate and harassment from the lenders for the collection.
Importance of a Debt Management Plan
When it comes to debt management plan, there are some crucial elements to consider.
- If you are in debt, a debt management plan saves you from major problems like harassment and high interest rates. When you have a large debt, most lenders may agree to reduce interest rate so that you can repay your debts more easily.
- If you have debt, you will likely receive harassment calls from the recovery agents for the collection of debts. Hence, with a trustworthy debt management company, you will get protection and stop them from contacting you.
- The payment you make every month will usually be less than the minimum amount you agreed to with a debt management plan.
- You will be able to focus on your financial growth and at the same time paying your debts
The Downsides to taking a debt management plan
No doubt, someone who is struggling to repay their debts can find a debt management plan convenient and cost-effective. But it is always necessary to know the drawbacks of a debt management plan. One of the downsides of a debt management plan is that it takes a longer time to repay your debts.
Although a debt management plan does not factor your credit score model, it can still affect your credit score. Your debts are likely being repaid and you are collecting more, but it is convenient and helps you to become debt-free.
Finally, if you fail or miss even a single monthly EMI, it can adversely increase your harassment from recovery agents.
Whatever the drawbacks are, a debt management plan is a saviour to your debt-stress by eliminating your complete debts.
If you are struggling with repayment of debts, the last thing that will hit the course is to stop paying them. This can lead to recovery agent harassment and severely affect your credit score. If you feel you are not in a position to repay your EMI’s, a debt solution is always available. A debt solution program with us will give you an affordable Debt Management plan so you can repay your debts and live stress-free. Contact SingleDebt on +91 961 910 3594 or fill out the form either on the home page or contact page