Consolidating Plan vs. Debt Management Plan

What a week of financial headaches!
Last week, I mentioned taking the route of consolidating my debts.
I decided to go a different route and instead, sign up with a company that helps create a debt management plan.
The reason for that is because the agent that I spoke with about consolidating debt was that ALL of my debts would have had to be calculated for the loan.
The goal is to build my credit score and I’m always hearing different things about how to build it and I wanted to keep control of my payments rather than going through them to pay all my debts off and then paying them only.

I’m not sure if that makes sense but I mostly wanted help with my loan payments and by signing up with a debt management company, I was able to do exactly that.

But going that route had it’s own set of learning curves.
As I was finalizing my plans there were a few things that I learned:

You have to call the individual loan companies to cancel your automatic payments.
When you do that, they no longer work with you but through another third party company.
This means that if you miss a payment, they won’t be the ones working with you but the third party collections agency will.

From my experience, most loan companies will work with you whether it’s pushing your due date back, giving you a lower interest rate, deferring a payment, etc.

Not only do you lose their customer service but you also lose your business with them. Meaning if you hit another financial snag and need a loan, you can’t loan from them again.

The lady I spoke to with one of the loan companies I borrowed from also said it’s similar to filing bankruptcy because you’re paying such a low balance (for example, $10 month) for a longer period of time.

So I went back to my notebook and crunched some numbers again.

Initially, these were the loan companies I had added to my debt management plan:
Advance America
Check into Cash
Speedy Cash
Money Tree
LendGreen
Golden Valley Lending
Blue Trust Loans
AmerAssist

(I know.. it’s a lot >.< )

After what I’ve learned, I revised it to just these three:
Golden Valley Lending
Blue Trust Loans
AmerAssist

The reason is because Golden Valley Lending and Blue Trust Loans has ridiculously high interest rates and I don’t mind not being able to loan from them again.
Like seriously, grateful for the loan equivalent of a cock block.
The amount they offer is seductive but I always regret it in the long run so I’m fine with cutting ties.

With AmerAssist, the pay off amount is high. I don’t believe there is an interest rate and I got to set my own payment plan but I figured I’ll just add it to the debt management plan (DMP).

With my initial plan, it was $699/month. I admit I was sort of hesitant to go with it but it was lower than what it would have been if I paid all my loan payments separately.

After adjusting to just the three that I mentioned, my monthly payment is now $353/month with the last payment date being February 2022- much more doable and less anxiety-inducing.
I am also able to pay more than the amount due without any fees or penalties so that is also a relief because I plan on putting in some extra fund when I do have them into the plan.

So what about my other loan payments?

I have budgeted enough for the month of December to get by for those payments.
Money Tree
I skipped a payment in November for Money Tree (with their approval so there’s no late fee or anything) and paying both November and December this month.
After that, I have one more payment left – no reason to cut ties with them by putting them through a debt management plan, especially if I need to borrow from them again.
Their interest rate is reasonable and I get a decent amount from them.

Check into Cash
Same thing here as Money Tree. I also recently refinanced with them so my payments are lower as well so the payments are doable but I do have about 4-6 months before I am done paying them off.

Speedy Cash
Speedy Cash lets you borrow up to $500. I took my child support off as a source of income so I only qualify for $200 but the payment is low and the interest rate is reasonable. I also have a couple more payments to go with this company.

Advance America
I qualify for the most with this place and the payment plan is not bad at all.
Interest rate is pretty low for the amount that I am borrowing. I had a few payments left before this was paid off as well but I got it refinanced – November was a tough month.

LendGreen
LendGreen is a loan company I wouldn’t mind cutting ties with either. You get a large amount to loan but the interest rate is high. I would say it’s not as bad as Golden Valley or Blue Trust Loans but it’s right behind them.
I was tempted to add them to the debt management plan but I am two payments away from paying them off and there is no need to extend my payments any longer than necessary by paying less through the debt management plan.

The Game Plan

The pay off amount for Money Tree and Speedy Cash are reasonable (ranges from $150-$250) so ideally, I’d like to pay them off in December by driving for Lyft.
After paying them off, I want to implement Dave Ramsey’s snowball effect and pay off Check into Cash by January.

After that, I have Advance America and LendGreen to worry about but by then, LendGreen will be paid off in February anyway and I’m not sure what I would owe Advance America during that time so it’s something to revisit in February.

I could technically implement the snowball effect into my debt management plan since there is no penalty for more than the minimum amount but I live on a paycheck to being-in-the-negative-until-my-next-paycheck basis and I don’t really like driving for Lyft more than I have to so I kind of want to just cruise along with my payments there on.

I’ll only pay extra if I get extra money or if I had the motivation to drive for Lyft.

But what about your credit card debt?

Because I am trying to build my credit, I did not want to include my credit card debt into my debt management plan. Paying them through a debt management program, I’ve learned, does not help your credit score. Like I said in the beginning of this post, you are paying less than the minimum amount due and it’s similar to filing for bankruptcy in that sense. No thanks.

I’ll keep my credit card debt and chip away at them and raise my credit score.

On that note, that was my experience with setting up a debt management plan, what I’ve learned about consolidating debt, signing up with a debt management plan, and what my thought processes were as I was setting mine up.

I hope this was helpful to anyone who was thinking about getting a debt management plan!

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