Year after year, the two most popular New Year’s resolutions are losing weight and paying off debt. The interesting thing is that people know what must be done to achieve either goal: If you want to lose weight, you need to eat less and exercise more. If you want to pay off debt, you need to cut your everyday expenses and use more of your income to pay down credit card balances.
Whether losing weight or paying off debt, the tough part is repeating the same process month after month. That’s where a monthly plan can help anyone stay on track.
Starting a debt management plan
A debt management plan is a monthly repayment plan for paying down your outstanding debt. You can work with your creditors, directly or through nonprofit agencies that offer this type of assistance, to design a debt repayment program that minimizes monthly payments, interest, and related fees. This enables consumers to repay their entire debt obligation at more favorable terms and on a plan that is within their ability to pay.
Just like a plan for weight loss, a debt management plan takes time. The repayment period varies based on the amount owed and the repayment terms, but for most people the average plan is structured to repay debt in 36 to 60 months.
Many people make the choice to start this type of plan soon after the holidays—or any time that late payments have caused their credit card interest rates to soar. Consumers who develop a debt management plan often see interest rates on all of their credit cards drop to 6 percent to 10 percent. Lower interest rates can result in lower payments and can help cardholders repay their balances.
Are you a candidate for a debt management plan?
- Using credit cards to cover daily living expenses?
- Making only minimum payments on credit cards—or struggling to make even minimum payments?
- Carrying multiple credit cards and rotating their use to juggle balances and due dates?
- Making payments late or missing payments for more than one month?
- Charging more each month on your credit cards than you are paying toward the balance?
- Juggling credit cards that are at or close to their limit?
- Unaware of how much you owe?
- Receiving calls from creditors?
Ignoring the problem won’t make it go away, so take action at the first sign of trouble. It can make the difference between a financial setback and a financial disaster.
TIP: Once you’re on a plan to pay off debt, consider checking your credit report to see the progress you’ve made.
Mechel Glass is the Director of Education for CredAbility. In this position, she is responsible for developing the curriculum and educational materials for online classes including webinars, podcasts, videos and listen-on-demand classes. She is responsible for managing the agency’s community outreach programs and staff, including financial education specialists in a 14-county area throughout metro Atlanta and north Georgia. She also manages the development and reporting of education partnerships online for the agency.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.