Credit card delinquencies are rising. Here's what to do if you're at risk

Debt management plans (DMPs) offered by nonprofit organizations can provide several benefits for individuals struggling with unmanageable debt. These include:

1. Consolidation of Debts: A DMP combines multiple debts into one, making it easier to keep track of payments and manage finances.
2. Lower Interest Rates: Credit counseling agencies negotiate with creditors to reduce the interest rates on your outstanding balances, potentially saving you money in the long run.
3. Waived Fees: In some cases, credit counseling agencies may negotiate with your creditors to waive certain fees, such as late payment or over-limit charges.
4. Stop Collection Calls: Once enrolled in a DMP, collection calls from creditors typically cease, giving you some relief from constant harassment.
5. Structured Repayment Plan: A DMP provides a clear roadmap to debt freedom, with a set monthly payment based on your financial situation.

However, there are also potential drawbacks to consider:

1. Extended Repayment Period: Participating in a DMP may extend the overall duration of your debt repayment, as you make reduced monthly payments based on the negotiated terms.
2. Potential Impact on Credit Score: Enrolling in a DMP may have a temporarily adverse effect on your credit score, as it indicates that you are seeking assistance with debt management. However, as you make consistent payments, your credit score can gradually improve over time.
3. Limited Access to New Credit: While on a Debt Management Plan, you may have restrictions on obtaining new credit, as some lenders may view your enrollment as a financial risk.
4. Not All Creditors Participate: While many creditors willingly work with credit counseling agencies, there is no guarantee that all your creditors will agree to the terms negotiated by the agency5.

It's important to carefully consider these potential benefits and drawbacks before enrolling in a debt management plan.

Negotiating directly with creditors can potentially benefit someone facing credit card payment difficulties in several ways:

1. Lower interest rates: You can request a reduction in your interest rate, which can lower your monthly payments and help you save money over time.

2. Waived fees: You can ask for the removal of late fees or other charges that may have been applied to your account.

3. Settling for a lower amount: In some cases, creditors may be willing to accept a lump-sum payment that is less than the full amount owed, which can help you resolve the debt more quickly and with less overall expense.

4. Creating a repayment plan: Some creditors may be open to working with you to create a repayment plan that fits your budget and allows you to pay off your debt over time.

5. Maintaining a good relationship: By negotiating directly with your creditors, you can demonstrate your commitment to resolving the debt and maintaining a good relationship with the creditor, which can help protect your credit rating and avoid potential legal actions.

Remember that the success of your negotiation will depend on your specific circumstances and the willingness of the creditor to work with you. It's important to be honest and direct about your financial situation and to explore all available options before making a decision.