can soon grow. Due to this, it might be challenging for you to make even the minimal monthly payments, which would push you farther and farther behind. You can start getting ominous letters and phone calls from debt collection companies. All of this might result in a situation that is incredibly stressful and has an impact on every aspect of your life.
A debt management plan can help by combining multiple credit card bills into a single, affordable monthly payment. And, in order to address your problem, each of them offers a totally distinct strategy; therefore, do your research before settling on one.
- What is a Debt Management Plan?
According to NCOA, the median total debt for older-adult households with debt was $31,300 in 2016—more than 2.5 times what it was in 2001.
A debt management plan (DMP) is a structured repayment program created to assist people in repaying their debts over a certain time frame. Even though a DMP can be helpful in some circumstances, it’s crucial to weigh the advantages and disadvantages before signing up for one.
Usually, credit counseling organizations offer debt management plans. Credit counseling entails objective, private counseling from a licensed counselor who specializes in credit card debt. A credit counselor works closely with clients to identify the debt relief strategy that will work best for them.
- Pros and Cons of Debt Management Plan
Pros:
- Consolidated Payments: With a DMP, you give a single monthly payment to the credit counseling organization, which subsequently gives the money to your creditors. This makes debt management easier and streamlines the payback procedure.
- Lower Interest Rates: Credit counseling organizations frequently have established connections with lenders and can bargain for reduced interest rates on your behalf. As more of your payments are used to lower the main debt, this could eventually result in financial savings for you.
- Waived Fees and Reduced Penalties: The waiving of some fees or the lowering of penalties related to your debts may occasionally be negotiated by credit counseling organizations. This can assist you in making savings and increase the affordability of your repayment.
- Financial Education and Budgeting Assistance: Most often, financial education and budgeting support are included in the services offered by credit counseling organizations. They can teach you how to better manage your money and keep you from incurring more debt in the future.
Cons:
- Impact on Credit Score: Your credit score can suffer if you join a DMP. Although it doesn’t have the same stigma as bankruptcy, it can still be perceived as a bad note on your credit record. The effects are typically less severe than those of other debt relief measures, like bankruptcy.
- Length of Repayment: The normal period of debt management plans is fixed, frequently falling between three and five years. You must practice financial restraint and stay on track for a considerable amount of time if you agree to a long-term repayment plan.
- Limited Debt Types: DMPs mostly target unsecured debts, including credit card balances, personal loans, and medical expenses. In general, a DMP does not cover secured debts like vehicle loans or mortgages. In order to manage such debts effectively, you must do so independently.
- Potential for Creditor Rejection: It’s possible that not all creditors will consent to joining a DMP. The majority of significant creditors are open to working with credit counseling organizations, although not all of them might agree to the recommended payment plan.
- Free Credit Counseling in North and South Carolina
With debt and outstanding bills being such a common problem for most Americans, you might be looking for the best way to crawl out of the financial hole you have found yourself in. Credit counseling helps people get out of different types of consumer debt, like credit card debt, student loans, or auto debt. The main goal of credit counseling is to develop a plan for handling and managing your debt and to get you the tools and financial education you need to follow through on that plan. . There are several resources available for free credit consultation for seniors in North Carolina and South Carolina. Here are a few options:
- Consumer Credit Counseling Service (CCCS). CCCS is a nonprofit organization that offers credit counseling and financial education services at no or little cost. To assist seniors in understanding their credit position, developing a budget, and creating a plan to repair their credit, they provide individualized credit consultations. To locate a CCCS agency close to you, get in touch with the National Foundation for Credit Counseling (NFCC) at their website: https://www.nfcc.org/
- Local Nonprofit Agencies: Seniors can get free credit counseling from a variety of local charity groups in North Carolina and South Carolina. Individual counseling sessions, credit record reviews, and advice on debt management may be offered by these groups. To learn more about the services that are offered, look online or contact your neighborhood community organizations.
- State Agencies and Consumer Protection Offices: State agencies and consumer protection offices in both North Carolina and South Carolina often provide resources and information on credit-related matters. They may offer guidance, educational materials, and referrals to reputable credit counseling services. Check the websites of the North Carolina Attorney General’s Office and the South Carolina Department of Consumer Affairs for more information.
- Annual Credit Report: Seniors in both North Carolina and South Carolina are entitled to receive a free annual credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion). By reviewing your credit reports, you can identify any errors, fraudulent activities, or areas that need improvement. Visit AnnualCreditReport.com to request your free credit report.
- HUD-Certified Housing Counseling Agencies: The U.S. Department of Housing and Urban Development (HUD) certified housing counseling agencies that provide various services, including credit counseling. These agencies can help seniors understand their credit and financial situation, provide guidance on credit improvement, and offer budgeting assistance. Use HUD’s online search tool to find HUD-certified housing counseling agencies in your area. Visit their website at: