Consumers who feel as though their personal debt is getting out of control might decide to look into a debt-management program as a solution. According to Consumer Reports, while the lure of debt-management programs might be tempting, the reality could wind up being something different. Research debt-management programs to understand the pros and cons of becoming involved in one.
Negotiation Help
According to the Federal Trade Commission, one of the benefits of a debt-management program is it can help you get control of your debt if you are unable to on your own. Many consumers feel intimidated by the thought of having to talk to their creditors and work out their own debt-management program. When you contract the services of a debt-management counselor, they do the work and negotiation for you and get you on a plan that fits your budget.
Experience
One advantage to using a debt-counseling service and a debt-management program is the benefit of the counseling service's experience, according to Investopedia. In researching debt-counseling services, you should look for a professional who has the proper certifications, experience and is certified by the National Association of Financial Planners or other reputable, national organization. This allows you to check on the experience of the financial professional and find one who gives you confidence.
Credit Freeze
According to online financial resource Bankrate, when you become involved in a debt-management program, your credit accounts are frozen while you pay them off. Creditors will refrain from giving you new credit until after you have paid off your debt-management program and have shown a record of on-time payments for 12 to 24 months after your program ends. This means if you need a car loan, credit card or mortgage, you might run into problems for up to seven years.
Default
According to Consumer Reports, your debt-management plan might include debt consolidation. While debt consolidation can help lower your obligations and interest debt, it also pulls all of your debt together under one loan. If you default on your consolidation program, you are defaulting on any account in the consolidation. For example, if you take out a second mortgage as part of your debt-management program and you roll your car loan into that as well, if you default on your consolidation program, you are also defaulting on your car and house payments instead of dealing with them individually.
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