High inflation is still making basic necessities like groceries and gas prices hard on the wallet. With high interest rates hovering around 20.10%, as of February, paying down credit card debt and other unsecured loans like medical bills can be a struggle.
If it’s become a challenge to pay back your debt, it might be time to talk to a credit counselor about a debt management plan (DMP). Once enrolled, a counselor will work with your credit card companies to consolidate your debt into one monthly payment at a reduced interest rate, so you can pay off your debt in three to five years.
Here’s how to know when it’s time to talk to a credit counselor:
You Can’t Seem to Get Your Balance Down
Paying on debt month after month and seeing little to no decline in how much you owe can be stressful. High interest rates can make it hard to get your debt under control.
The Road to Repayment Is Longer Than Five Years
In the third quarter of 2024, active credit card accounts only making the minimum payment reached a 12-year high. If you’ve significantly reduced your spending and are still finding it hard to pay beyond the minimum payment, it’s going to be a challenge to pay down your debt in a reasonable amount of time.
You’re Unable to Pay the Minimum
It’s important that you pay at least the minimum payment every month to avoid delinquency and missed payments. Both can have an impact on your credit score, which ultimately makes it harder to get loans with lower interest rates.
Collections Agencies Are Calling
You usually won’t be penalized for a late payment until it’s past the 30-day mark, so if you start getting calls from creditors it’s a good indicator that your repayment method isn’t working for you.
Bottom Line: A Debt Management Plan Can Help
A DMP can help you get your finances back on track, so you don’t have to constantly worry about how you’re going to pay back your debt. Your credit counselor will also help you create a budget, allowing you to better master your personal finances.
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