As of February, credit card interest rates are still high at 20.10%, and inflation is still making prices for necessities like groceries and gas hard on the wallet. In a recent survey, NerdWallet found that 48% of households with revolving credit use their credit cards to pay for those necessities. Unfortunately, the higher your debt, the more challenging it is to pay it down.
A debt management plan (DMP) can help you tackle your debt by streamlining the repayment process and reducing what you owe overall. When you enroll in a DMP, a certified credit counselor will work with your credit card companies to consolidate your debt into one monthly payment while also reducing your interest rate, so you can pay your debt back more efficiently.
Here are four signs that a debt management plan may be a good idea for you:
Your Balance Isn’t Going Down
Instead of going down, your balance remains the same or is still going up, despite making regular payments. This indicates that you’re unable to put enough toward your debt each month to make an impact against your interest rate.
Paying Off Your Debt Is Going to Take Longer Than Five Years
In the third quarter of 2024, the number of active credit card accounts only making the minimum payment reached a 12-year high. The bottom line is you need to make the minimum payment on your cards to keep your credit in good standing. But only making the minimum can make it harder to pay down your debt within a reasonable amount of time.
You Can’t Pay the Minimum Payment
Not paying at least the minimum payment on your credit cards and other unsecured debts like medical bills will put you into delinquency and impact your credit score. This will ultimately make it harder to get loans with lower interest rates in the future.
You’re Getting Calls from Collections
When you’re late on a payment you typically have a 30-day grace period before you’re reported to consumer credit agencies. If you’re getting calls from collections agencies, you’re considered delinquent and your credit score will be impacted.
Bottom Line: A Debt Management Plan Can Help
If you’re serious about paying off your debt, a debt management plan is designed to help you pay your debt off in three to five years. This gives you structure, guidance, and a timeline, allowing you to tackle your debt more efficiently and reducing the burden of high interest rates.
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