Debt management plans are financial strategies to help reduce and eliminate unsecured debt. Such debt comes in various spending habits from exceeding credit cards to medical bills.
A debt management plan can help you schedule payments to ease your financial burdens.
How Does a Debt Management Plan Work?
A debt management team will work with you on financial planning, which will help tackle your debt. This involves working with your creditors to reduce your monthly payment and the interest on your debt.
Your management team will work with your creditors to set up a payment plan that takes single regularly scheduled payments to pay off multiple creditors on your behalf.
The Advantages of a Debt Management Plan
A plus point of a management plan is the ease in making payments. Your debt management team will help with the financial planning needed to pay off your debts to creditors. Setting up a system that works for you and your creditors is a significant step toward clearing your dues.
A financial firm like Mooney Lyons can help with that process and provide advice to guide you to your financial goals.
Setting Up Timely Payments
A debt management team will typically work to set up regularly scheduled payments to help ease your burden. By providing a monthly sum to pay your creditors, your debt manager can help clear multiple fiscal responsibilities off your plate. This makes it easier to spend time focusing on other priorities instead of paying bills, one after the other.
Additionally, enrollment in a debt management plan is recorded on your credit report and can improve your credit score.
Reduced Interest Rates
Notifying your creditors of enrollment in a debt management plan can lead to lower interest rates on borrowed credit and monthly loans.
These benefits do not appear immediately, in fact, it may even have some negative effects in the short run. However, the long-term benefits kick in once you start the payment process.
The Downsides of a Debt Management Plan
The plan may affect your credit score through financial planning moves like the closure of a credit card account. This move lowers the amount of available credit and may negatively impact your credit score.
Is This the Right Financial Move for You?
If you are struggling to pay your bills, then debt management should play a part in your financial planning process.
The thing to stress is whether your debt is overwhelming to the point that you cannot handle the sheer number of bills. A plan can help you stay clear of declaring bankruptcy.
Choosing a Debt Management Plan
Are you getting frequent calls from creditors about your bills? A debt management plan can help stop those calls and give you some peace of mind. If you can take control of your debt and pay three months’ worth of dues, then the creditor calls should stop coming.
A Debt Management Plan Is Just One Option
Debt management plans are just one option to handle growing debt and to support your long-term financial obligations. These plans are offered by credit and financial counseling agencies such as Mooney Lyons.
Financial advisers can help you set up a system that works to your advantage in paying back your dues. It can prove to be an important part of your financial planning. However, other options to deal with debt include agreeing to a debt settlement and declaring bankruptcy.
Head to Mooney Lyons for our advice on debt management, which is under wealth management services. Our advisors can be reached here.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.