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HomeBlog Debt Consolidation5 Pros And 5 Cons Of Debt Management
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5 Pros And 5 Cons Of Debt Management

August 17, 2013 by National Debt Relief

blackboard with pros and cons columnsDebt management is one of the programs that can be associated with debt consolidation. The whole process involves the restructuring of the consumer’s debt payment plan so that it becomes easier to follow. Sometimes, people just need to reorganize their payments so they can pay off their debt more efficiently.

Although debt consolidation loan is another way of consolidating debt, most financial experts will suggest debt management. Although both are effective, debt management offers a more concrete debt solution compared to debt consolidation loan.

5 Benefits of using a credit counselor in debt relief

One of the strongest points of debt management is the fact that you have a credit counselor helping with your debt. In fact, this program begins with credit counseling. In most cases, you will go through the process of counseling before you can really decide if you will allow the counselor to manage your debts for you.

If you do decide to use debt management, you need to pay a service fee of no more than $50 a month. The credit counseling part is usually free but the debt management is not. You need to be careful about the credit counseling agency/debt management company that you will hire to help you out. There are various scammers who can trick you out of your money so be cautious of your selection. It helps to begin your search by looking at the members or reputable organizations like the National Foundation for Credit Counseling or the NFCC. You should also look at the Better Business Bureau or BBB website to find out if the company you are interested in has received any complaints from their past clients.

When you have found the right company, here are the benefits that you will get should you choose to use this debt relief option.

Debt relief expertise and negotiation skills

The whole lynchpin of debt management is call the DMP. Short for debt management plan, this is what you will use to restructure your debt payments. The credit counselor will use their expertise to help you create this plan. Not only that, they will take charge of sending this to your creditors and negotiate so that they will permit you to follow this plan. It usually contains a lower monthly contributions and your creditors will have to agree with it so you will not suffer any penalties. In some cases, the credit counselor will also negotiate for a lower interest rate.

Working relationship with creditors

All the negotiations will be tricky but credit counselors usually have a standing working relationship with your creditors already. That will make it easier for you to get the approval for the DMP that you both created. Not only that, the counselor will know how to construct it in such a way that the creditors can accept it without any of the payments breaking your budget.

Does not ruin credit score

Since there is no debt reduction in this program, you don’t have to worry about your debt solution damaging your credit score. As long as you stick to the plan, you will not only keep your score, you can steadily improve it as well.

Freezes credit account to keep from incurring debt

When you enroll your credit card debt in a debt management program, the creditor will freeze that account so that you will not add any more debt under that account. This can keep you from incurring more debt and it will only last until you have completed the debt management plan.

Expert advice about personal finance

Probably the best advantage of using debt management as your debt solution is the fact that the credit counselor can teach you the basic personal finance skills that will keep you from debt. These include budgeting, saving, smart spending and the other habits needed for you to live within your means.

5 reasons why debt management is not the right debt solution

While a debt management plan can help with your credit problems, the fact remains that it is not always for everybody. You need to possess the right qualifications and sometimes, the right temperament for it. Here are 5 reasons why this debt solution may not be the best option for you.

You have the wrong debt type.

Debt management can only work on unsecured loans, credit card debt, medical bills and other personal loans. It cannot help with secured loans or student loans. If you do not have the right debt type, you will not be accepted into the program.

You need debt reduction.

Even if you have the right debts, if you know that you need a debt reduction, you may be unable to afford debt management. This program can lower your monthly payment because your current balance is stretched over a longer payment period. But you will still end up paying for everything.

You do not have a stable income to support your payments.

Since there is no debt reduction, this program naturally requires you to have a steady and stable income. Otherwise, you will be unable to support the monthly contributions. And since this is over a longer period, the stability of your payments must be ensured.

The lower interest rate is not guaranteed.

While the lower monthly contribution is guaranteed, the lower interest is not. You have to keep this in mind so that you are not disappointed in case the creditor will not agree to lower it despite the efforts of your counselor.

You want a quick way to get out of debt.

This debt relief program takes around 5 years to complete. Since you are making small payments, you should expect that the progress will be quite slow. If you want a faster way to get out of debt, you need to make bigger monthly contributions or you may have to select another debt relief program.

If you want to learn more about how debt management can help you, watch this video about how you can use debt consolidation.

Do you qualify for debt consolidation?

National Debt Relief
National Debt Relief

National Debt Relief is one of the largest and best-rated debt settlement companies in the country. In addition to providing excellent, 5-star services to our clients, we also focus on educating consumers across America on how to best manage their money. Our posts cover topics around personal finance, saving tips, and much more. We’ve served thousands of clients, settled over $1 billion in consumer debt, and our services have been featured on sites like NerdWallet, Mashable, HuffPost, and Glamour.

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"When I first decided to go with National Debt Relief and I..."

Moderate National Debt Relief Caller: Charlotte Transcribed WE 1/17/2021 Charlotte: Our call may be recorded. What actually made you decide to work with our National Debt Relief as opposed to other providers? GLYNN: Well, when I first decided to go with them and I talked with the representative, I got a favorable impression of him. And since we've gone with him, we've had very good experience with them. Charlotte: Can you tell me about the program that our National Debt Relief signed you up for? GLYNN: It's a debt consolidation program. Took our credit cards and then working to pay them off. So far, they paid one of my wife's off and one from me. Took the harassing phone calls that we were getting and got them to stop and got creditors to wait on their payments so we could get money to pay them. Charlotte: What did you think about the enrollment process you went through? GLYNN: Enrollment process? Well, it was, I guess... Charlotte: Like how easy or difficult did you find the enrollment process to be? GLYNN: It was no [unclear 0:02:52], just what we could do, and looking at our financial situation, what we was able to do. It's just that, mainly, I was the point where I was fixing to go bankrupt and I didn't want to do that. And this was a way to, I guess, not to go bankrupt. But it still left that option open. Charlotte: In what ways would you say that this program has worked for you? GLYNN: Well, I guess the biggest thing is it stopped the harassing phone calls that we have been getting sometimes five or six times from the same creditor a day. It gave us an opportunity of being able to, I guess, set up a fund that we can use to eventually pay off our credit cards and our debts. Charlotte: About how far would you say that you were in at this point? GLYNN: At the time we signed up? Charlotte: At this point right now. About how far are you in the program? GLYNN: Well, it's, [0:05:00] I guess, about -- I would say I think I was like nine months. And like I say, they were able to pay off one of my wife's credit cards and are working on another one and was able to pay off one of my credit cards, and hopefully be able to pay off another one. Charlotte: Walk me through the interaction with your National Debt Relief negotiator. Give me a little insight on what that experience was like with that representative. GLYNN: Well, he helped us go through and get signed up on a program. He helped us with the getting, I guess, a financial report to establish a savings account to be able to use to start paying our debts off. We didn't know what to do or how to go about doing it. Charlotte: Is there anything about your National Debt Relief negotiator that really stood out and impressed you at all? GLYNN: Yeah, his manner and I guess he was polite and he didn't put down on us. And he led us and showed us the direction we need to go. Charlotte: Is there anything about this process that you would have liked to have seen handled differently? GLYNN: No, not really. Charlotte: If you had to rate this experience on a scale of one to five, and five is that you would recommend to friends and one is you were pretty dissatisfied, how would you rate it? GLYNN: I would rate it at a 5. Charlotte: Would it be okay if I posted your comments as a review on our public website for National Debt Relief? They just like to know what their customers felt about... GLYNN: If you think they're good enough to post. [chuckles] Charlotte: I will send over a link so that you can have it as a record for yourself also at glynncoates@gmail.com. How would you say that your life has been impacted by working with National Debt Relief? GLYNN: Well, it's taken off a lot of the burden off that we were under. We was to the point of, "Just go ahead," and getting a lawyer to file bankruptcy. But this has given us an opportunity to pay some of our debtors back. We made the debts under good face and circumstances beyond our control, it got out of hand. And so, we were trying to -- we wanted to pay them back, [0:10:00] or as much as we can so that, I guess, more ease in our minds. Charlotte: If a friend or a family member were asking you about National Debt Relief, what would you tell them? GLYNN: I'd tell them if they was needing, that they were good to work with and they continued to try to help and work with us. Charlotte: Our call is recorded.

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Glynn Coates
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