If you have a significant amount of debt, you may be wondering how to choose a debt management plan vs. other options. Consolidation, settlement and refinancing are all viable ways of dealing with sizable debt. Continue reading this slideshow to learn more about these options and how they may help you.
A debt management plan is developed with the assistance of a credit counseling agency. They will look at your income and develop a budget with you, that allows you to pay off your debts.
You’ll pay back the debt over several years, usually five or less. This gives you hope, since you know what your future can look like in five years, if you stick to your plan.
With a debt management plan, you’ll usually pay back all of the debt but at a pace that you can manage. You won’t have to join several lines, do multiple online transfers or remember multiple payment deadlines, since you’ll only make one payment a month. The agency will distribute that payment to all of your creditors.
A credit counseling agency will often get your creditors to lower the interest that you pay. They also should arrange for late fees to be waived. It’s important that you choose a good counseling agency that takes the initiative with suggesting every solution that can help you.
Debt management preserves your credit rating. Since you make payments regularly until you pay off your debt, your credit score won’t be decimated in the way that it would be with debt settlement. You’ll also develop habits, such as budgeting, that improve your financial wellness throughout your life.
It is important to keep in mind, however, that your credit score may be negatively affected, but your credit score won’t be hit as hard as it would if you did not take steps to repay your debts.