Okay, you are dealing with debt and you are looking for the best solution to improve your finances. Being in debt doesn’t just make it problematic to do the things you would like to, it can affect your mental health. When you are dealing with debt, you’ll feel under a lot of stress and pressure, which means that your whole life can be affected by debt. Not only that but you may also find that people around you, such as family members or loved ones will be impacted by the way you struggle to deal with debt.
There is also the fact that you may be as focused or in control at work as you would like to be, and this can cause further problems. If you aren’t operating at the best of your capabilities, your employer may not be pleased or impressed with you. This means you may end up looking for another job before too long and this can all stem from dealing with debt.
When it comes to dealing with debt, one option is to choose a debt management plan, or a DMP. This is a way for you to get help from a professional with plenty of experience in this area. A debt management agency takes money from you and then distributes it across your creditors. There are many positives associated with this action, particularly the way it ensures you don’t have to deal directly with your creditors. If you struggle to deal with people, leaving this for someone else to deal with can be seen as a great reason to choose a debt management plan.
Debt Management Plan Cons
Not everything associated with a debt management plan should be considered as a positive step though. There are negative elements to bear in mind and it may be that a debt management plan actually causes you more problems. This is why you need to know what the negative sides of a debt management plan are before you commit to this style of agreement.
The informal nature of the agreement means your creditors may change their minds
A debt management plan is an informal agreement, not a legally binding contract. This means you may find that the creditors will change their mind when it comes to the payment methods or rate of payment you have agreed. This can cause a lot of problems if your creditors change their mind and if you are not equipped to revert back to full payments, you may find your finances are placed at risk due to the changing nature of the creditors’ plans.
Your credit rating may be harmed
While a DMP isn’t as harmful as outcomes like bankruptcy or a CCJ, it can still impact your ability to get credit in the future. If a DMP is listed on your credit score or report, some creditors will be unwilling to provide you with credit. After all, if there is proof that you haven’t been able to manage your debt effectively, you can see why some lenders would be in no rush to provide you with additional credit.
If you are looking at the long term impact, you may want to consider whether a DMP suits with your future hopes and plans.
You will end up paying more money over a longer period of time
While paying less money every month is of benefit for many people, this will likely mean that you pay more money in the long term. This isn’t ideal and it may be that you are better of avoiding a DMP to be in greater control of your finances. This is something that every individual has to weigh up, so make sure you think about what is right for your needs.
Not all debt can be taken care of by a DMP
Not every debt is eligible for a DMP so if you have debts such as student loans, credit card debt or car repayments, you’ll need to find another way to deal with the debt. Given the volume of people who are struggling with these debts, it is clear that many people may not be able to use a DMP to deal with debts.
There may be fees associated with your DMP
Another factor to consider comes with the fact that your DMP may charge you a fee for their service. If you are already struggling with finances, paying for another service may not be in your best interests.
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.
September 7, 2016