Important things you must know about Debt Management Plans (DMPs)

If your business has witnessed customers who have defaulted payments, then, believe me, you are not alone. Recent years have observed a major upsurge in the number of defaulters in the country. According to The Washington Post, approximately 77 million Americans have debts in collection accounts. 

Quite surprising, isn’t it?

However, considering the figures, business owners have started relying on the agencies which are not merely the collectors but are their partners in the process. This partners-in-the-process is the collection agents who help debtors to make payments, conveniently, without using threatening tactics. 
A major development in the whole collection system has been observed, which is the initiation of the Debt Management Plans. 
You can understand it in this way - it’s an unofficial agreement with creditors which helps debtors in repayment of debts over a specific period of time. Once the agreement is accepted by both the parties, debtors are supposed to make the payments regularly to the debt management company. 
This system is quite helpful to the customers who have blemishes on their credit score and are drowning in debt. 
But how legit are the debt management plans? And is it really helping the consumers? Let’s have detailed information.

Payments in one monthly installment: Once a customer agrees to pay according to the debt management plan, it gives them the ability to consolidate all payments into one monthly installment. Thus, the debt collector agency distributes payments to the creditors. 
Helps in waiving off fee: Debt management company also helps in eliminating future late fees that might be levied in the process of adjusting payments. 
Legal destitute: The debt management system gives a feasible option to debtors to declare themselves legally destitute. However, no debtor would want to declare bankruptcy, in the event, they find themselves unable to pay all their creditors even after trying debt management, they can go with this option.   
Auto-debit system: Once the process of paying the creditors to begin, debtors don’t have to worry about paying monthly installments. The debt management plans use the auto-debit system and within a few years, debtors will have the full amount paid to their creditors. 
Helps in lowering interest rates: One of the biggest advantages of getting a debt management plan is that it helps in reducing the interest rates. Most creditors immediately lower the interest rate. It is usually helpful for debtors who have a default APR of 20 percent or more than that. 
The debt management plans have proved to be a lifesaver for a lot of debtors.

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