It is common to ask questions like when I will pay my debts? Or how will I pay my debts? Or will I be able to pay my debts? Or how can I pay my debts? Or is my debt very high? What is clear is that you are not alone, and unfortunately, there are many people in the same situation.
You may think that you need to earn a lot of money to pay your debts, but it is not the only solution; you can also get it by saving. In reality, the money you save is more valuable than the money you earn, because if, for example, you make € 100, you have to take away your taxes, while if you save $100, it is $100, what you save, neither more nor less.
A plan or debt management program is a plan to get rid of debts between a debtor and one or more creditors. There are companies dedicated to managing these plans, you pay them a monthly amount of money, and they are responsible for distributing it among your different creditors.
Many ads say “get rid of your debts in 30 days” or something similar. Still, debt management programs are not a magic solution to your problems. They need analysis of your financial situation, planning, and your constant cooperation and help to solve them.
Characteristics of debt management plans
Debt management plans give you many options to eliminate your debts, reduce the principal amount of debt, eliminate fees for late payments, lower your APR and provide you with the flexibility to pay your debts within a period within your possibilities.
- Principal amount of debt: Most debt management companies negotiate with your creditors and reduce the principal amount of debt you owe.
- Fees for late payments: Some debt management companies can get you not to apply penalties for late payments, which in some cases is a significant amount of your total debt, which saves you a lot of money.
- APR: Some debt management programs are carried out to reduce a very high APR from a particular account.
- Monthly installments: Debt management programs also determine the amount you have to pay monthly. During the program, you have to pay a single monthly amount to the company to manage your debts. The more you can pay, the less time it will take to eliminate the deficit. The debt management company sets the amount you have to pay per month based on your financial situation.
- Annual time frame: Debt management can also be planned for long periods. In such cases, you have the option to extend your period from 2 to 4 years or sometimes even longer, which is convenient for people who cannot afford to pay once.
How long does it take a management program to pay all my debts?
The duration of a debt management program depends on the amount and type of debt you have and the monthly amount you can afford to pay. An advisor will never advise you of a long-term payment management plan. However, if you cannot spend large monthly amounts, you must follow a long-term payment plan.
A typical case of credit card debt management can take 3-9 months. If someone wants to accelerate the process, it could be reduced to 1-3 months, and if someone wants to extend the period, it could be extended to 12-18 months. Some debt reduction and management companies can even extend the process to 4 years or more.
How much do companies that are responsible for payment management plans charge?
Generally, debt management companies do not charge you directly. Still, instead, they leave part of the total amount that you give back to your creditors. In general, they charge an average of 8% -15% of the total debt.
You can get back on track with the plans of debt management. But, if you do it for the wrong purposes or poorly, it can be detrimental and unnecessary. Therefore, you must know the following things about debt consolidation;
- It is a third-party system of payment.
- You can structure majority debt management plans in the same method.
- You can see it negatively on your credit report. However, it isn’t a bankruptcy.
- You will need to complete your debt management plan first if you want to use your credit card.