Are You in Debt? 6 Reasons You Need A Debt Management Plan

financial freedom plan Are You in Debt? 6 Reasons You Need A Debt Management Plan

Debt can be a recurring nightmare for those struggling to manage their money. If left unchecked, it may take forever to shed it off your back. However, there are some types of debts like mortgages that are a gateway for accumulating wealth and building financial health. 

In the same vein, when you pile up debts in such a way that you end up juggling bills haphazardly, it may take ages before you find your way to financial freedom. Rather than worrying about your financial life, it’s time to do something about it. If push comes to shove, you can seek the input of credit counseling organizations and other professionals who create debt management plans. 

Debt Management Businesses

While some organizations offer pro bono services, others render their services at a fee. 

These organizations are often a reprieve for people who have been held hostage by unsecured loans. Their primary role is to come up with debt management plans tailored specifically to each client. If you opt to use a debt management plan, you will work out how to repay your debts and avoid the likelihood of defaulting or declaring bankruptcy.  

Perhaps you’re wondering what a debt management plan is. In layman’s terms, it is a payment schedule developed and managed by a credit counseling agency. The agency will go a step further and educate you on how to manage your finances effortlessly. 

When you enlist the services of a credit counseling agency, you’ll be assigned a counselor who will assess your financial situation. He/she will furnish you with the most viable options of how you can achieve financial wellness. 

Generally, a debt management plan is home to a wide range of benefits if your debt never seems to go away. A plan tailored specifically to you will set you on a path of paying off your debts.

Benefits Of A Debt Management Plan 

Here are some of the top benefits of having a debt management plan tailored specifically to your situation.

1. Sound Advice

Before you start following a debt management plan, the credit counseling agency will put you through a financial counseling session. Here, a financial analyst will review your budget, debts, and options to help you determine the best way forward. Whether or not you opt to go with their plan, the initial session (free or paid) may turn out to be helpful. 

2. Alleviation Of Late Fees

If you have been struggling with debt for any length of time, your past due balances may have caught up with you, even if you’re in a position to make monthly payments. Such a scenario is better solved if you have a solid financial plan at your disposal. Since this happens often, it’s not uncommon for your creditors may agree to update your credit account status to current if you can show them you have a plan going forward.

Nevertheless, you’ll be required to remit several on-time payments before the creditor eliminates any incurred penalties. 

3. Clearance Of Debt Before The Set Deadline

If your financial counselor is doing their job, he or she should persuade your creditors to lower the interest rates attached to your debts. As you continue to make monthly payments, a larger portion of this money will clear the principal balance. By lowering interest rates and focusing on paying off one debt at a time, the time it takes to get out of debt will be significantly decreased.

4. Fewer Harassing Calls 

The moment your creditors get wind of how you intend to repay your debts, thanks in part to your debt management plan, they will do away with the frustrating calls. In some instances, these calls may keep coming for several months since there is a lot of paperwork involved. However, the longer you stick with the plan, the less your creditors will harass you.

5. Accountability

In the absence of a plan, you run the risk of struggling with debt with no end in sight. But with a comprehensive plan, accountability will creep in. With the help of your credit counselor, you’ll devise a plan for repaying your debt and they will walk with you until you’re debt-free. 

6. Increases Your Credibility

The process of clearing your financial debts is tiring, and it can put you under stress. This anxiety is often the case if the creditors are hot on your heels. When you’re in this position, the last thing you want is to be on your mortgage creditor’s speed dial. 

Therefore, the agency you’ve enlisted to develop a debt plan should address any issues that may arise with your lenders. Legally speaking, your creditors reserve the right to contact you, but you can direct such calls to your credit counseling agency. 

In essence, if you consider a debt management plan as a viable option, you should reach out to a certified credit counseling agency. While some agencies are nonprofits, others will require you to part some with money before they get down to work.  

By and large, a debt management plan should be your first plan of action as you obtain sound financial advice on how you can pay off your creditors. Do not let debts drive you crazy. Speak out!