A debt management plan is a legally binding agreement between a lender and a borrower which deal with the repayment terms for an outstanding debt. This most commonly refers to a debt management program of people dealing with high consumer debt. This program allows them to negotiate with their creditors in order to repay back the debt over a period of time. It may also involve debt settlement wherein the lender reduces the debt balance by a certain amount. Debt consolidation is another option which requires the borrower to combine all existing debts into one debt by taking out another loan to pay off the lenders. Visit: https://cpgcomplete.com/ to learn more about debt management.
Before taking any debt management plan or a debt consolidation loan, you need to first consult the consumer protection group experts for advice. Your credit counselor will help you evaluate your financial situation. Then, based on your assessment, he/she can develop a debt management plan (DMP). Based on the DMP, a suitable debt consolidation loan program can be applied for either by you or the lenders. You can also consider going for a bankruptcy if your financial situation calls for it.
The main objective of a debt management plan is to reduce the interest rates and eliminate late fees. By doing so, it helps you rebuild your damaged credit scores. Hence, before you apply for a DMP, your credit counselor will check on your current credit scores. If you have bad credit scores, you may still get approved for a DMP, but it will be more difficult. On the other hand, if you have good credit scores, you can go for a DMP even without getting a pre-approval from the credit counselor.
With the help of a debt management plan, you can get rid of several issues like over-limit, charge-off, missed payments, and bankruptcy. Another important advantage of debt settlement is that it eliminates the need for a debt settlement lawyer. A lawyer will only help you get the maximum amount reduced from your creditors. However, you can easily settle your accounts with the help of a settlement company.
Before you apply for a debt management plans, it is important that you do regular credit reports so that you know about your credit scores and how to improve them. Most creditors may not check your credit reports every month because they may think that you are handling your accounts yourself. However, if you fail to report every month, some creditors may refuse to grant you additional lines of credit or may even report your failure to settle your accounts as negative entries in your credit reports.
With the help of debt management plans, you can easily pay back all your debts and improve your credit score. However, there are certain disadvantages of debt management plans. Mainly, you will have to make one payment per month towards the total cost of your plan. This payment can be quite high depending on your monthly income. If you are not able to make this payment regularly, your account can be shut down. View here for more information about the subject: https://en.wikipedia.org/wiki/Debt.