What Are The Pros And Cons Of Debt Management Program?

The debt management program is one of the options available to people struggling with debts. You can just run a Google query and find many debt management companies claiming to offer the best debt management program for people like you. This program can lower your monthly payments and reduce your credit card interest rates. So, going for one such program is a great idea. However, there are some disadvantages of this program. So, before you make any decision related to your debts, understand both the pros and cons of these programs.

Pros 

You shall Be Making Only One Monthly Payment

You do not need to worry about multiple monthly payments. Just send money once a month to the debt management company you are working with. This company will make monthly payments to all the lenders and creditors.

You shall Get Lower Interest Rates 

The debt management company will try to do negotiations. So, you are more likely to pay lower interest rates. The interest rates of unsecured loans and credit cards are pretty high. So, with a lower interest rate, you will make reduced monthly payments.

You Will Pay Off Your Debt Faster 

With lower interest rates and negotiated terms, you are making reduced monthly payments. As a result, you will be debt-free faster. Usually, a debt management program is three to five years long.

Cons  

You need to close credit card accounts 

You have to close all the credit cards included in the debt management plan. The debt management company wants to make sure that you are not increasing your debt burden while making monthly payments. Even when a credit card is not included in the debt management program, use it only when there is an emergency.

You need to make consistent payments 

To reap the small monthly payments and lower interest rate benefits of this program, you have to make consistent monthly payments. Otherwise, you will lose all the benefits.

Not all creditors will be a part of your plan

Many but not all creditors participate in debt management programs. If this happens, going for a debt management program is not the right choice.