We Aren’t Just for People in Trouble
By Linda Jacob, AFC®, CFP®
If you are able to make your monthly payments on your credit cards, but the balances just don’t seem to go anywhere, we are the program for you. You do not have to be late on your payments in order to take advantage of lower interest rates and/or smaller monthly payment that a Debt Management Plan can offer you.
We see all kinds of situations in our office. Yes, we help people who are falling behind, but we also help people who just want to get out of debt as quickly as possible. Sometimes, we see people that quite simply just need to organize and simplify their financial life.
A debt management program is the best kept secret. When you enter into a Debt Management Plan or DMP, you will make a monthly payment to your DMP company, who will in turn send a payment to each of your creditors. Because you are paying back the full amount, and sending a payment each month, the creditors will work with you by offering you concessions.
The creditors will either lower the monthly payment they want, lower the interest rate, or a lot of times they do both. Each creditor tells the DMP administrator what they are willing to do, but the average interest rate on most plans will drop to approximately 6% to 8%. The monthly payment many times is lower than the total minimums you were originally paying, but on occasion it can be about the same as you are currently paying.
There is an enrollment fee and a monthly fee for the DMP. The interest saved far exceeds the monthly fee, and makes the plan worthwhile.
The cards will close when they are put into the plan. Some enrollees will see a small dip in their credit score when this happens. Since the creditors continue to get a monthly payment, they continue to report to the credit bureaus a great payment history, so this quickly adjusts and, in many cases, improves your credit score.
If you aren’t sure if we can help, call us for an appointment. It’s free!