The moment you’ve had enough of the limitations caused by debts, the best course of action is to set up an appropriate debt repayment plan. This will help you stay focused on the goal and aid quick debt elimination.
Most credit counseling agencies are quite helpful when it comes to debt management. The basic design of the programs available makes it easy for you to crush the debts. Nevertheless, if this approach is taken for the wrong purposes or through an agency that doesn’t meet the necessary threshold; bigger problems may arise. Here, you’ll find some of the essential things you must take into account when selecting a debt repayment plan.
There are no significant differences between the available plans
In essence, almost every debt repayment plan you will find on the market resembles other existing options. The branding and marketing strategies may be quite different but the design and mode of operation are essentially the same. When using a debt repayment plan, expect to pay about 2.5% of our debt in fees. Nevertheless, if your case is unique and characterized by several hardships, there’s is a possibility to get a better offer with lower fees.
You should also realize that creditors consider all the agencies to be the same since the repayment period lies between three and five years. If anything comes up and you are no longer interested in continuing with the plan, almost every agency will have no problem terminating the contract at any given time.
Credit counseling should come first
Before you dive into debt management plans, it’s quite important that you get an appointment with a reputable credit counselor who will help you in assessing your financial situation. It is important that you evaluate your ability to meet all the basic financial obligations before considering any financial solution.
A credit counselor is strategically positioned to study your financial profile without bias and propose viable ideas on the methods you could utilize to deal with debts. These counselors know exactly what to ask consumers when trying to come up with an actionable financial solution based on the prevailing circumstances.
Sometimes getting the appropriate agency can be daunting
The advantages of settling on a partner with a good reputation can never be stressed enough. It is disheartening to find some agencies in the market with minimal customer interests, especially when you consider the clients are already overwhelmed with debts.
However, most non-profit counseling organizations tend to be better. Basically, these are associated with the NFCC and FCAA. Before admitting any member, these organizations are very strict in their vetting process and they make sure all members have well-trained counselors who meet all the ethical requirements. But this doesn’t mean you should overlook the importance of an agency that forwards your payments to creditors on time.
Debt management plans may alter the lenders' perception of you
While you are putting something towards your outstanding debts regularly, there is a high likelihood that the amounts you are paying are below the set minimum. Prospective creditors will eventually realize that you’ve been repaying the quick loans via a debt agency which implies that you are still struggling with your finances. As a result, it is normal for a lender to decline your loan application until you’ve cleared all your debts.
Debt management is in no way identical to bankruptcy but almost every lender puts them in one category. But when you compare the two, it’s better to have a debt repayment plan as opposed to filing for bankruptcy. The obvious reason is that clearing your outstanding debts will pave way for better credit scores which is not the case with bankruptcy.
It’s not a one size fits all arrangement
Before making a decision, it is prudent to first evaluate your situation to determine if it is a viable option. To start with, you need to study all the debts you are having and decide if a debt repayment plan is a great approach. If you are struggling with unsecured loans like personal loans and credit cards that come with high interests, this might be a great option for you.
On the other hand, complicated debts are seldom solved with consolidation plans. In addition, you should be committed to honoring the obligations of debt consolidation plans. If you find there is sufficient money left after paying your expenses and savings, it's likely that you are in a position to adjust your lifestyle and pay the debts on your own.
Closing your existing accounts
When you agree to work with a debt management agency, they will require you to terminate your existing accounts while refraining from acquiring others when the debt consolidation plan is active. While this can be a tall order for people used to the convenience of credit cards, it has its benefits. The idea is to have you adjust unhealthy spending habits that may jeopardize the debt elimination plan.
As a mitigation measure for emergencies, most agencies will grant you the permission to hold one card that can save the day. However, this has to be a card with low-interest rates and that can be used for multiple purposes.
You have to diligently report your accounts
When you are using an agency to handle your debts, you have to help them to accurately track the outstanding balances. Basically, these agencies keep track of all principal balances on your accounts but not the interest rates accrued by the various accounts.
If you fail to submit the creditor’s statements to the debt agency, you will be surprised to find that the reports generated by the agency are very different from the actual situation. Therefore, take it upon you to help the agency reconcile all your accounts.
Final words
When you take too long to deal with your outstanding debts, you may be surprised to find that available options are quite a few. Instead of settling for bankruptcy which carries adverse effects that last for many years, a debt consolidation plan can do the trick. Nevertheless, you have to be willing to go through the entire process which may take several years to complete.
