What Is a Debt Management Plan?

If you are already at a point in your life wherein your debts are already the main cause of your life’s daily struggles, then it is already high time for you to get a debt management plan. Having a debt management plan can help you get that debt-free life you have always hoped for.

In this article, get to know more about debt management plan before you would think and decide to get one.


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Debt Management Plan

debt management plan
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What Is a Debt Management Plan?

A debt management plan is definitely not a loan if that is what you are thinking. A debt management plan is actually a debt solution that can help you in paying your debts at a very affordable and manageable rate. If you are already struggling to meet and pay the repayment amount you originally agreed with your creditors, then having a debt management plan can be the perfect solution for you. You may also want to know what a cost management plan is.

Since debt management plans can allow you to pay off your debts that comes in an affordable rate, it would already be suitable and manageable for you to pay your non-priority debts such as your credit or store cards, overdrafts, and personal loans. You may also see communication management plan examples.

It will also be easier for you to identify and figure out what debts you can easily pay off first and what debts that come last, how much money you are to shell out for debt payments in every month, and other logistical decisions that have become a frustrating endeavor when you were dealing your debts alone before. You may also like quality management plan examples.

With the use of debt management plan, there is also a possibility that your creditors may agree to waive the fees you have to pay and they may also agree to decrease the initial interest rate. How so? This is because your creditors will gain more confidence knowing that you would definitely pay off your debts. You may also check out behaviour management plan examples.

How to Know If Debt Management Plan Is Right for You

Are you still in doubt about whether you should get a debt management plan or not? To know and rest your doubts, make sure that the following applies to you:

1. You are struggling to manage and keep up with your credit cards and loans but you can manage to afford all of your monthly payments on your priority debts like mortgage and rent and you can also manage to afford all of your living costs.

2. You start to find the need to look for someone who could deal with your credits in your place.

3. Having one set monthly payment makes it possible for you to budget.

If the three applies to you, then it is high time for you to consider getting a debt management plan.

Impacts of Debt Management Plan

A debt management plan may sound like the only solution you have left that can help you in managing your debts. It sure is; however, there are some repercussions or the downsides:

1. Paying back your debt might take a long time since you will already be paying less for each month.

2. Your creditors will not necessarily freeze the interest and charges imposed on your debts.

3. Your debt management plan might charge you a fee and that is an addition to your long list of expense and things-to-pay.

4. Some of your creditors might not cooperate with you and would even discontinue their contact with you.

5. Your debt management plan might show on your credit card, which makes it difficult for you to acquire another credit in the near future.

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Advantages of a Debt Management Plan

Despite its repercussions and downsides, the advantages of a debt management plan outweigh them all. Here are some advantages of a debt management plan that can definitely help you decide on getting one:

1. A debt management plan can offer credit card consolidation even without a loan.

2. A debt management plan can help you stay organized as well as punctual when it comes to your bills and payments.

3. A debt management plan can create a realistic monthly budget that is according to your income.

4. A debt management plan can assist you in formulating your financial goal.

5. A debt management plan can give the opportunity for you to make regular and timely payments which, in return, can also help in improving your credit report and eventually your credit score.

6. A debt management plan can consolidate multiple payments into a single monthly payment that will be easier for you to remember.

7. A debt management plan can allow the possibility of having a reduction on the interest rates, fees, and even on your monthly payment amounts. You may also see procurement management plan examples.

8. A debt management plan can end all that stressful collections calls and letters and all the frustrations that come with it.

9. A debt management plan can enable you to have a definitive target date of when you will be able to finish paying all of your unsecured debts.

Debts You Can and Cannot Pay Off with a Debt Management Plan

1. Debts you CAN pay off with a Debt Management Plan

Keep in mind that you can only make use of a debt management plan in paying off your non-priority debts.

  • Bank or building society loans
  • Catalog, home credit, or in-store credit debts
  • Credit card, store card debts, or payday loans
  • Money borrowed from friends or family
  • Overdrafts
  • Personal loans

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2. Debts you CANNOT pay off with a Debt Management Plan

Most of the debts you cannot pay off with your debt management plan are those unsecured debts. Some of these are the following:

  • Credit card payments
  • Council tax
  • Court fines
  • Child support and maintenance
  • Hire purchase agreements, if what you’re buying with them is essential
  • Income Tax, National Insurance, and Value-Added Tax
  • Gas and electricity bills
  • Mortgage, rent, and any loans secured against your home
  • Student loan
  • TV license

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