Debt Management FAQ
Frequently asked questions about debt management programs
Answers to all of your questions about a debt management program, so you can make an educated choice
When you are struggling with debt, all you want to do is find a solution. But it can be difficult to figure out which method is the best fit for your lifestyle and situation. Searching for information on the topic can be a frustrating obstacle on the way to debt freedom.
For your convenience, we’ve compiled some of the more frequently asked questions below. Over the course of tens of thousands of visits and phone calls to our office, we’ve learned that those with debt want clear, concise information so they can make an educated decision about what to do with their debt. Hopefully, our FAQs will give you a better idea of how a debt management program works.
If you have a question that isn’t included below, or you ready to get started on your journey to debt freedom, just contact Consolidated Credit at 1-888-294-3130 for a FREE debt evaluation from a trained credit counsellor. Or, you could complete a Free Debt Analysis online and a credit counsellor will contact you shortly.
What is a debt management program?
Simply put, it is a plan for you to get out of debt!
- All of your debts will be consolidated into one simple monthly payment at the lowest interest rate possible.
- It removes the headache and hassle of having to deal with multiple creditors demanding payments at different times.
- And, a debt management program saves you money by reducing your interest rates.
How long will it take to get out of debt if I use a debt management program?
Typically, most clients are debt free within 3 to 5 years. At the beginning of your program, your credit counsellor will give you an estimate of how long it will take to get completely free of your unsecured debt within 36 to 60 monthly payments on your debt management plan.
How does a debt management program help me get out of debt?
- We combine your debts into one monthly payment.
- We also work with your lenders to lower interest rates and payments. This means more of what you pay will go to reducing the principle and not towards interest and fees.
- The program will also eliminate any penalties or added fees on your accounts.
Put these things together and you could be debt free in less than five years!
How much will a debt management program reduce the interest rates on my debt?
On average, clients will see their interest rates reduced from 0% to 10%. Your credit counsellor will also try any penalty fees waived by your creditors to help you get back on track.
How much can I expect to pay each month on a debt management program?
Some of our clients have had their monthly debt payments cut by up to 50% – but each client is different. We have found that, on average, monthly payments are reduced by 30-50%!
What makes a debt management program more convenient?
When you enter into a debt management payment, you no longer have to worry about the various deadlines and amounts owed to each of your creditors. Instead, you will pay the credit counselling agency a single payment on the same day each month and they will disperse it to all of your creditors on your behalf.
How will a debt management program affect my credit scores?
It really depends on your situation as everyone’s credit report is different. In some cases, you may experience an impact on your credit score; this usually occurs when you have excellent credit upon entering the program. In many cases, people who enroll have already experienced at least some drop in their credit score as a result of their reliance on debt.
In either case, paying off debt and maintaining a consistent payment history will help to improve your credit profile.
Creditors may also apply a special “credit counselling” notation on your credit report. This will remain on your credit report two to three years from the date you completed the debt management program and paid off the debt.
Will I still receive calls from collectors on a debt management program?
When you start the program, you still may receive calls from your creditors and debt collectors. However, you can now inform them that you have started a debt management program and are being represented by a credit counselling agency. From that point, all calls can be directed to your credit counsellor and you won’t have to worry about picking up the phone any longer.
How do creditors know I’ve joined the program?
Soon after you join the debt management program, we will contact your creditors to let them know. We will take care of this step for you.
Will I still receive monthly statements from my creditors?
It depends on the creditor’s policies; however, in many cases you will still receive your monthly statements. Please note, since you are enrolled in the debt management program, you don’t need to respond to the statements. Instead, you can use them to track your progress as you start eliminating your debt.
How does a debt management program differ from debt settlement?
A debt management program will help you pay off your debts in full at reduced interest rates. The program will help you find a manageable monthly payment that fits into your budget so you can pay off the debt quickly.
A debt settlement is a more formal consumer proposal that involves negotiating with creditors to settle your debts for less than what you owe. Settling the debt at less than what it is has an outstanding negative impact on your credit report and will remain for years, even after you have paid it off.
This all sounds pretty good – there has to be at least a small downside, right?
Entering into a debt management program will require a small lifestyle change. For the duration of the program, you will not be able to use your credit cards or attain new unsecured credit. However, since you will have reduced monthly payments, you will have more money available to pay for your necessities as it won’t be going to debt payments anymore.
Actually, many of our clients who became debt free through our debt management program have said that living without credit cards taught them a valuable lesson. They learn how to manage money better and live without debt – lessons that they keep with them well into the future.