Do Debt Management Plans Work?

Given the huge difficulties people have with debt in the modern day, it is important to find solutions that will help people take better control of their finances. There are plenty of options to consider but there has been a growing level of focus on debt management plans. In theory, these sound like a great way to take control of your finances and move towards a safer and more secure financial footing.

However, you can see why many people will be wary about investing time and money into debt management plans. If you don’t have a lot of money, you have to make sure that it is being put to good use. If your finances are being stretched, you cannot afford to gamble on risks or something that may not pay off. This is why there is a need to determine if debt management plans work or not.

You’ll find that debt management plans are commonly cited as a way to avoid bankruptcy and move towards paying off debt. The way debt management plans work is that the borrower pays money to an agency and then the agency pays off the creditors. The role of the agency comes with the standing agreements they have developed with creditors, which helps to reduce the cost of debt.

These agencies will likely have agreements in place that sees a creditor accepting a smaller amount in interest rates, fees and payments, all of which ensures that there is an opportunity to pay off debt with less money.

Debt management payments can help you move forward

If the debt management plan is agreed and put into action, it can see debt being paid off at a much faster rate, and many people find that they are able to get out of debt in a couple of years. These debt management plans also have a positive impact on credit scores. Compared to other forms of payment or paying off debts, debt management plans are not as intrusive when it comes to a person’s credit score. This is an obvious benefit and is another key factor in why so many people consider debt management plans as a way to take control of their debt and finances.

It would be wrong to think that debt management plans are the only available solution. There is a stigma attached to bankruptcy but there are benefits associated with bankruptcy that can make life easier for some people. The fact that every individual, couple or family is unique means that there is a need for people to obtain a tailored solution. It can be difficult to provide template advice that will make a difference for most people, so don’t naturally assume that a debt management plan will be good for you just because it was good for someone else you know.

When it comes to a debt management plan, you need to be aware of the fact that this style of solution isn’t ideal for all types of debt. If your debt is based around your mortgage, a student loan or a car loan, this style of payment plan isn’t going to help you out.

Debt management plans can see you being denied access to credit

There is also the fact that people using a debt management plan will find that they have to deal with life without access to much, if any, credit. This can cause a lot of other problems and you need to think about this when considering if debt management plans are the way forward for you. While credit can cause a lot of problems, when used correctly it can be of considerable benefit to some people, so don’t rule it out entirely.

Many people will also find that debt management plans offer very little leeway when it comes to their finances, so it may not a good solution if you know that your finances will be tight some months. Missing a debt management payment can cause even more problems so you need to be sure that it is the right option for your needs.

There is no getting away from the fact that for many people, a debt management plan is a good way to take control of their finances. However, it is also important to note that for many people, it isn’t a great option. This means you need to take time to weigh up what financial option is right for your needs.

Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.