Debt Management Plan facts in Term of Pros and Cons
Posted on Nov 8 2012 at 01:33:34 AM in Finance & Investment
Debt management plans have become popular in recent years as it helps several debtors to eliminate debt in full. But it does not mean the option is always best for all debt situations. CCCS (consumer credit counseling service) offer these plan and they are different in terms of qualify offered in the plan. Before enrolling in any repayment option, it is quite necessary to know about the pros and cons of the plan to determine the efficiency of it.
Credit counseling agencies organize a meeting with debt expert to analyze financial situation of debtor. Further they recommend debt management plan if appropriate in your situation. Late fee can be eliminated and they may arrange lower interest if creditors agree to do so. You will need to make single monthly payment to counseling agency and further they distribute the amount among lenders accordingly.
Pros of Debt Management Plan:
• Fixed Monthly Payment: Monthly payment will not increase. The only term is you need to make timely payment each month. Make sure that counseling company or you are sending payments in time.
• It may be required to close credit card accounts. It is beneficial as your debts become stable. Using more credits will always increase debt obligations.
• In some cases, you may get approval for lower interest rate from lenders and they may also eliminate late payment charges.
• It makes the repayments manageable and easier by combining multiple payments into single monthly payment reasonably affordable for you.
Cons of Debt Management Plan:
• DMP is not appropriate for everyone. It can be helpful only for those consumers who have enough steady income to make payments on regular basis and person who can manage monthly expenses without using credit card. It is better that debtor has saving account for emergency expenses.
• Payment plans are very rigid so you cannot skip or make less than agreed amount. In that situation DMP will be considered failure and all the agreement will be canceled.
• Credit can be affected as the plan can be recorded on credit statement depending upon the creditors.
• You can cover only unsecured debts in a DMP. Other obligations like tax, child support, mortgage or secured debts will be managed by you individually.
• Some companies may be fraud so selection of authorized company is most important step.
• Good research work is necessary to find a good credit counseling company.
Robin Smith is an experienced debt advisor of UK. He has contributed lots of informative and descriptive articles on web through debt relief order debt issue topics.