Debt management plan can be beneficial for you if you’re struggling to keep up with your monthly payment. The credit counselors associated with the debt management companies can help to negotiate with the creditors to lower the monthly payment. The counselor may determine a budget plan after reviewing your financial situation. He may conduct a credit counselling session in order to guide the consumers to inculcate a good spending habit. Therefore, enrolling in a debt management program can help you avoid filing bankruptcy. In order to know about other benefits, you need to continue reading the article.

Here are some of the advantages of debt management plan:

1. Negotiation with the creditors: The credit counselors associated with the debt management company can negotiate with the creditors on your behalf to lower the interest rate on the principal balance. Your monthly payment is reduced once you manage to lower the interest rate. The skilled counselor can negotiate to waive off late fees and penalty charges in order to make the owed amount affordable to pay off. Therefore, a debt management plan can help you pay off the debts quickly.

2. Reduce in the number of collection call:
There is a significant reduction in the number of collection calls when you enroll in a debt management program. If you get harassing calls from the creditors, then the debt arbitrator may sent a certified letter to the creditors requesting them to cease communication. Therefore, the creditors may avoid contacting you when you’re represented by the debt arbitrators.

3. Lower your monthly payment: The debt arbitrators negotiate with the creditors to lower the interest rate on the principal balance. When the interest rate is lowered it may help to reduce the monthly payment to make it affordable to pay off.

4. Freeze on interest as well as other charges: During a debt management plan, the lenders may give their consent to freeze in interest and other charges. In this situation, you may have to prolong the repayment term but you’re not required to pay more on the interest rate. Therefore, a large portion of the payment goes towards paying the debt, rather than the interest. As a result, you can pay off your debts more quickly than you actually imagine.

5. Improve your credit history and score:
The effect of DMP is not as severe as filing bankruptcy on your credit history or score. When you enroll in a debt management program your unsecured delinquent accounts may be closed and it may affect your credit history. Generally, consumers who have defaulted on payment enroll in a debt management program. Therefore, enrolling in a debt management program may not further affect your credit report. Once you start paying off your debts, you can manage to improve your credit score.

Therefore, the above mentioned advantages of debt management plan are enough to avoid filing bankruptcy. Remember, filing bankruptcy may blemish your credit report for 7 to 10 years. You may not get a new loan as your potential lenders may consider your high risk borrower.

By Andrew
Jackson