5 surprising debt management program benefits to know
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As the credit card bills pile up and the variable interest rates on your cards climb higher, it’s easy to become trapped in a cycle of debt that you can’t easily overcome. And, when you add theĀ compounding credit card interest charges, it’s easy to see how your balance can grow faster than you can make a dent in it ā especially if your income is already stretched thin by other bills. But while this can be an isolating issue to deal with, the reality is that millions of other Americans are kept up at night by these types of debt-related issues.
What many of the people who are dealing with this issue don’t realize, though, is that there are solutions created specifically to help people climb out of credit card debt. For example, debt management programs are offered by credit counseling agencies and have, for decades, been helping people regain control of their finances by making it easier (and more affordable) to pay off what’s owed. That can make them a smart solution to consider for those who are struggling to tackle their growing credit card debt.
Despite their proven track record, though, many of the valuable benefits these programs provide remain unknown to those who could benefit most. So what are the more surprising benefits of enrolling in this type of program? That’s what we’ll review below.
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5 surprising debt management program benefits to know
Enrolling in a debt management program now could pay off thanks to these big (but lesser-known) benefits:Ā
Creditor benefits you can’t access on your own
Perhaps the most powerful yet least understood aspect of debt management programs is the special relationships credit counseling agencies maintain with creditors. When you enroll in a debt management program, you’re not just getting organizational help ā you’re gaining access to reduced interest rates, fee waivers and payment terms that can vastly reduce the cost of your debt. What’s surprising, though, is that these same creditors may deny these rate or fee reductions if you call them directly. That’s because the pre-negotiated arrangements between counseling agencies and creditors represent years of established relationships that individual cardholders simply cannot replicate.
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Freedom from collection calls
While most people expect a debt management program to help organize and lower their payments, few anticipate the immediate relief that can come from ending debt collection calls during the process. Once you’re enrolled, creditors are often more willing to work with you and, in many cases, will stop these calls and the other aggressive collection efforts they can use to compel you to pay. This alone can make a huge difference in reducing your stress and helping you focus on paying down your debt instead of constantly battling creditors.
Built-in financial guidance
Many people sign up for a debt management program to reduce their monthly payments, but one often overlooked benefit of this type of debt relief is the financial education that comes with it. For example, many debt management program providers offer built-in financial counseling, providing insights on things like budgeting, spending habits and long-term financial planning. This kind of guidance can be invaluable in preventing future debt issues and helping you develop healthier financial habits.
Credit improvement despite the short-term dip
A common misconception about debt management programs is that they hurt your credit score ā which is often the case with other types of debt relief. And, while enrolling in a program might cause a temporary dip (as you’re typically required to close your credit cards to comply with program guidelines), the long-term effect can be quite positive. By consistently making on-time payments and gradually reducing your debt through this type of program, you demonstrate responsible financial behavior. Many people find that their credit score improves significantly after completing the program, setting them up for better financial opportunities in the future.
A clear timeline for becoming debt-free
Unlike minimum payments on credit cards that can keep you trapped in a cycle of debt for decades, a debt management program provides a structured timeline for becoming debt-free. Most plans last between three to five years, giving you a clear endpoint and a realistic path to financial freedom. This sense of progress and direction can be incredibly motivating, helping you stay on track and committed to your financial goals.
What else to know about debt management
Despite their benefits, debt management programs aren’t the right solution for everyone. Most programs require you to close your credit accounts as part of your enrollment, which can be challenging for those who rely on credit cards for emergencies. The programs also typically take several years to complete, requiring sustained commitment. And the monthly program fees, while typically modest, can also add additional costs to already stretched budgets.
Debt management programs also generally work best for unsecured debts like credit cards and personal loans. They generally can’t help with mortgage debt, auto loans, student loans or tax obligations. For those facing these types of debts, different strategies may be necessary.Ā
The bottom line
Debt management programs offer far more than just a path to becoming debt-free. The surprising benefits ā from creditor concessions to built-in financial guidance and credit score improvement ā can make them worth considering for anyone struggling with unsecured debt. For many, though, the greatest benefit is one that can’t be quantified: the confidence that comes from facing financial challenges head-on and emerging stronger on the other side. So, if you’re considering debt management, look beyond the basic payment calculations and consider how these unexpected benefits might help improve your financial situation.
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