Payday Loans Debt Consolidation

7 Very Useful Tips To A Successful Payday Debt Management Plan

A payday debt management plan can prove to be very helpful for those who are struggling with huge amounts of payday loan debts. The process requires you to sign up with a third party, which acts as a mediator between you and your lenders. Once you sign up with them, all collection calls will stop immediately. There will not be any direct communication between you and your lenders. Instead, the debt management company will represent you and they will talk to your creditors on your behalf.

Do You Really Need To Sign Up For Such A Plan?

Before you sign up for a payday debt management plan, the first thing you have to do is to research your own requirements and decide whether you really need to hire a financial expert to manage your payday loan debts. Following are some of the situations when a DMP (debt management plan) makes sense.

• You are looking out for a way to reduce interest rates on your multiple payday loan accounts.
• You are fed up with harassing collection calls and you want these calls to stop right away.
• You are having difficulty in negotiating an affordable repayment plan with your payday lenders.
• You debts are growing very fast and you do not have an idea on how to take control of the situation.
• You already have tried various things to save enough cash (such as, through budgeting), but nothing has worked effectively for you.
• You have dozens of payday loan accounts to handle and you are overstressed because of it.

Effects On Credit Score

Whether a payday debt management plan will affect your credit score positively or negatively depends on a wide array of factors, such as the way your creditors report your debt payments to the three major credit bureaus (Equifax, Experian and TransUnion). If they report the payments as “paid as per a settlement plan”, it will have a negative impact on your credit score. On the other hand, if they do not mention the settlement plan and simply report the payments as “paid in full”, it will result in a significant boost in your credit score. Therefore, before you sign up with a DMP, you are strongly recommended to enquire the agency in question about how the plan is going to affect your FICO score.

Is The Plan Affordable?

Before you sign up for a payday debt management plan, you must also review all the aspects associated with it thoroughly in order to decide whether the plan is truly an effective one and that you can afford the payments as suggested by this plan. Look at your monthly income and expenses. It will help you get the true picture about how much you can afford to contribute every month toward your payday debts. It is very important for you to keep in mind that credit counselors and debt management companies do not have any magic wand and your debts are not going to be cleared away overnight just because you have signed up for a DMP. If you sign up for a plan, where you cannot afford the required monthly payments, you will only push yourself into a deeper ocean of debt troubles.

Get Approval From Your Creditors

When it comes to using a payday debt management plan, another thing that is very important for you to understand is that your lenders are not legally obligated to accept any DMP that you are considering signing up for. Therefore, you must first contact your creditors and request them to accept the DMP proposal. Any debt management plan will work only when your lenders give their approval to participate. Alternatively, you can also ask your credit counselor or debt management company to contact your lenders on your behalf and convince them to allow you to pay off your debts using such a plan.

Do Not Miss Payments Once You Sign Up

If you fail to make payments even under a payday debt management plan, it will only make thing much worse. Your lenders will lose trust in you and they are very much likely to take some hard actions, such as filing a civil lawsuit against you and request the court to garnish your wage. Besides that, just because you are unable to make the payments, you will still be liable to pay the fee to the debt management company you have signed up with. Therefore, you must do your calculations thoroughly much in advance. Go for it only if you are sure that you can afford to make timely payments.

Understand The Cost Of Plan

A payday debt management plan requires you to pay certain amount of money for the convenience and relief it brings for you. The best plan is obviously the one that helps you save more on your debts and charges a lesser fee. So, do not forget to read the fine prints thoroughly before you sign it. In particular, you must do a thorough review of the ‘disclosure box’, which is legally mandatory for all debt management companies to include in the written contract of the DMP. The details provided in the disclosure box will give you a better picture about the actual cost of the plan.

Regular Monitoring

Once you tart making payments as part of a payday debt management plan, you must also monitor the progress regularly. Make sure the entire process is a completely transparent one. You must study the monthly statements of your payday loan accounts to find out whether your creditors are receiving the payments in a timely manner or not. Besides that, you also need to review your credit report to make sure your payments are being reported correctly (as “paid in full”).

Overall, as we can see, if you keep in mind the above seven things and act accordingly, you will definitely be able to choose the most suitable payday debt management plan and to make the best use of the same. Strong determination and financial discipline are very important in this regard.


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