Debt Management Plans, as the term suggests, are meant to “manage” your debts. Firms offering these programs work with you and your lenders to develop a plan to pay back your unsecured debts such as collection debts, small medical debts, credit cards and the like. In most cases, these firms are called credit counseling agencies.
Essentially, debt management plans might help solve the financial woes and money troubles of some people. However, if you don’t do your due diligence, you just might end up opening a can of worms. Many of these debt management firms impose skyrocketing fees for services that borrowers can pretty much handle themselves. Some of them make promises they don’t keep and worse, they neglect to promptly pay lenders or not at all!
These kinds of situations might make you think twice if a debt management plan is actually a good idea. Before jumping the gun on a debt management plan, it’s best to know first how it works.
You deposit funds into a bank account on a regular basis, say monthly, and the credit counseling firm will use those funds to pay your lenders under the plan. Normally, you have to stick to a regular scheduled payment into that said account within three to five years. Most plans need you to pay the credit counseling agency a fee on top of the monthly deposits.
Another significant disadvantage of debt management plans is that it tends to be pricey.
Should you consider a debt management plan offered by a lawful credit counseling company, you should never let your guard down and throw caution to the wind?
Think hard, before signing up!
Here are some ways you can protect yourself from debt management plan scammers:
After much consideration, if you still lean towards signing up for a debt management plan, there are ways you can make sure that you are dealing with a legitimate nonprofit credit counseling firm.
So, do your due diligence.