What is a Debt Management Plan?
The most common misconception is that debt management plans are consolidation loans and that a credit counselling organization pays out your debt and then you simply make a monthly payment to them. Unfortunately this is not the case. A debt management plan is a consolidation of payments. What a debt management firm does is establishes monthly repayment terms with your creditors. You, as the debtor, would make a single monthly payment to the credit counselling organization and in turn the credit counselling organization distributes that payment to all of the individual creditors. Debt Management Plans can be very beneficial to clients for a few reasons.
1) The application process is quick and easy. There is no credit check necessary to be approved for a debt management plan. Although it is helpful to have a copy of your credit report to ensure that all debts are included, it’s not necessary and often times debt management plans are established without a credit bureau.
2) If you have been turned down for a consolidation loan through your bank you are almost guaranteed to be approved for a debt management plan. Really the only requirement for the program is that you have a steady source of income and that your debts are unsecured.
3) The harassing phone calls stop! Once you have entered into a debt management plan your creditors will be advised by the organization and be asked to contact the firm for any questions pertaining to the account. This means no more phone calls at work, no more phone calls at home, and no more sleepless nights
4) You get the benefit of one single monthly payment. You are not responsible for making multiple payments to multiple creditors anymore. All you have to do is make one single monthly payment to the firm and in turn that firm sends out the payments to all of the different creditors you have. This makes it very simple to budget for the month. You know the exact amount due, what date it is on, and how it will be taken.
Debt management plans are a very effective way to deal with your debt, especially if you are in collections. If your accounts are in collections we strongly advise you to go with a debt management plan and save yourself years of a bad debt history. Use the knowledge and experience of a credit counsellor and put them to work for you. If you would like to know more about a debt management program and how it can help you fill in the quick contact form and have a counsellor contact you.
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