What are Debt Management Plans?

Debt management plans are one tool used by credit counselors to help lower your interest rates on credit cards and provide you with a lower consolidated payment. Originally created by credit card providers, they have been in use for decades to help financially distressed consumers get a break on their credit card debts.

Get Reduced Interest Rates

Credit counselors can send proposals to your creditors on your behalf. These proposals for repayment show that you have
demonstrated financial need that qualifies you for a lower interest rate. When credit card issuers understand your commitment to getting out of debt, they frequently respond by agreeing to the requested reduction in your interest rate. These permanent rate reductions are locked in as long as you continue to make the necessary minimum payment though the debt management plan.

Get Lower Minimum Payments

One of the main benefits of a debt management plan is the ability to make one consolidated monthly payment that is often actually lower than you were paying before. The ability to reduce your finance charges allows credit counselors to develop a plan with the flexibility of a lower payment that still eliminates your credit card balances faster than you normally could on your own. This lower consolidated payment can help you find more room in your monthly budget for other bills.

Eliminate Credit Card Debt

Debt management plans are designed to eliminate all of your credit card debt within three to five years. The benefit of lower finance charges allows you to apply a much higher percentage of each payment to the principal balances on your credit cards. If your financial situation improves ahead of time, you can save even more by increasing your payments. In addition, you can benefit from an improved credit score by paying off your debts while demonstrating a good repayment history. If you are ready to eliminate credit card debt today, contact a credit counselor today to inquire about a debt management plan.

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