If you are faced with overwhelming debt, then you may be looking for a way to manage all the money that you owe. One of the most popular ways to potentially handle overwhelming debt is to enroll in a debt management program. However, there are some things that you should know before handing your debt issues to a debt management program.
So what is a debt management program?
Quite simply a debt management program is a service that will combine all of your credit card debt into one payment plan. In order to enroll into a debt management program, you will pay the administrator of the program a modest fee. Some people prefer to use a debt management program because it offers some benefits, including simplifying the debt payment process.
1). You may be able to do it yourself
It is possible to manage your debt issues yourself if you are willing to put in the work. If you don’t want to pay a debt management company, then simply contact all of your creditors and negotiate a payment plan that will make it easier for you to handle.
2). Your credit score could drop
If you enroll in a debt management program, you may see a drop in your credit score. This could be a problem if you are looking to get a home loan or auto loan in the near future. However, if you are dealing with credit card debt issues, it might be a smarter idea to postpone attempting to take on more debt.
3). You will not be able to get new credit
While you are enrolled in a debt management program, you will not be able to get new credit. This could be a benefit since you should not want to take on new debt while you are trying to deal with your current debt situation.
4). The debt management plan pays your creditors
With a debt management plan, you pay the debt manager and the debt management service, in turn, pays your creditors. For this service, you will pay the debt management company a small fee.
5). Be sure that you are saving money
Some debt management programs will claim that they can save you money by offering a lower interest rate. However, when you factor in the fees from the debt management company, the savings may not add up. Be sure to run the numbers yourself before making a final decision.
Is a debt management program worth it?
Overall, a debt management program may be your best course of action if you are overwhelmed with debt. However, you may not want to consider a debt management program if you don’t want to pay the extra fee and you plan to apply for more credit in the near future.
Knowing the facts before you enroll
Enrolling in a debt management plan can be a major step in taking control of your debt. However, there are some consequences to enrolling in such a program. Be sure to do your research on various debt management programs before making your final enrollment decision.
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