If you feel like you’ve been struggling with credit card debt for years, you’re not alone. A GOBankingRates survey recently found that 15% of Americans have been in credit card debt for 15 years. With the national average interest rate on credit cards currently at more than 23%, even people with good credit scores will be hard-pressed to get an interest rate lower than 20%.
All that said, if you’re struggling to make payments or are overwhelmed by the amount you’re paying in interest alone, a debt management plan can help you get back on track.
Debt Management: How does it work?
First, you’ll want to call and make an appointment with a certified credit counselor. Often, credit counselors can meet with you either in-person or over the phone. You’ll want to have a list of all your household bills and credit card statements ready. From there, your counselor can help you create a repayment budget, which they’ll then use to contact and work with your lenders.
What are the benefits?
- More accessible payment schedule: Typically, your counselor will combine your credit cards into one payment, that’s frequently 30%–50% less than what you’re currently paying.
- Lower interest rates: Your counselor will work with your lenders to get your interest rate reduced—often down to 6%–10%.
- Quick repayment: Debt management plans are designed so that you can pay off your debt in three to five years.
By choosing to go with a debt management program, you’ll help keep yourself from defaulting. You could see more than 100 points shaved off your credit score for late or missed payments, as well as penalized with late fees and an interest rate hike. And once your credit utilization ratio (the balance between your available credit and what you owe) goes down, you will start to see your credit score recover.