Posted on June 17, 2009 at 8:24 am I am interested in credit counseling and am curious as to what the disadvantages of these debt management plans are. Just want to be sure I know what I am getting into!  

Posted on June 17, 2009 at 9:34 am The following are some disadvantages of debt management plans: 1) A lot of the credit counseling agencies are owned and funded by the actual creditors. As a result, these agencies must cater to the desires of the creditor over those of their clients. 2) DMPs typically are set up over 5 years- if you miss a payment, most often you will be removed from the program and have to start off right where you began- still in debt, with no effective solution to get out of it. 3) Not all creditors work with credit counseling agencies- so you may end up signing up with a company and finding out that your interest rates can't be lowered at all. 4) If you have a very high debt amount, it will be very difficult to eliminate everything that you owe within a 5 year time frame, even if your interest rates are lowered. 5) A lot of people have had success contacting their creditors on their own and getting their interest rates dropped- without having to pay a monthly fee to a company to do it for them!

Posted on June 18, 2009 at 8:22 am You painted somewhat of a grim picture there. Are there any advantages of credit counseling?

Posted on June 18, 2009 at 9:55 am Yes of course there are. People who have a steady income and no problem making their monthly payments usually would benefit from credit counseling if they have high interest rates and a low debt amount. I say that because the likelihood of missing a payment and being removed from the debt management program is far less. As a result, if their interest rates are lowered successfully, and they continue making all of their payments, they should be able to pay off their debt faster, pay back less (less interest paid) and in the meantime benefit from the simplicity of making only one payment (as opposed to many) per month.

Posted on June 18, 2009 at 9:57 am Those are all good points to keep in mind. Also, if you are able to pay more than the minimum amount for your monthly payment, credit counseling would benefit you if the interest rates are the only problem, simply because you may be able to pay off the total debt amount in less than 5 years, the time people typically are enrolled in a debt management program.

Posted on September 25, 2009 at 6:27 am What are the disadvantages of Debt Management Plans?I think it's not the plan that's going to be the problem..it's the credit counseling agency's character and the consumer's financial condition in the long run.

Posted on October 16, 2009 at 2:13 am Instead of asking what the disadvantages of debt management plans are - why not ask the advantages instead?

Posted on October 16, 2009 at 2:28 am Instead of asking what the disadvantages of debt management plans are - why not ask the advantages instead?I agree with you, and to answer that - debt management plans can save the consumer from filing bankruptcy. Also, debt management plans are going to be looked upon more favorably than a bankruptcy on the credit report.

Posted on October 16, 2009 at 2:29 am Instead of asking what the disadvantages of debt management plans are - why not ask the advantages instead?Debt management plans are also relatively cheaper than the other debt relief programs, namely bankruptcy or debt settlement. Also, the plan is not a loan.

Posted on October 16, 2009 at 2:32 am What are the disadvantages of  debt management plans?Not all creditors work with credit counseling agencies.If the consumer's debt is more than $10,000 it might be hard to negotiate its interest rates. Might as well do debt settlement.The drop out rate is high as it lasts for 5 years.