Payday Loans: Everything You Need to Know

Payday loans are an option for anyone in a sticky financial situation. But, they come at a cost.

Keep reading to learn more about how they work and if getting one is the right decision for you.

What is a payday loan?

A payday loan is a short-term, high-cost loan that you can use to cover any immediate cash needs. They’re designed to cover you until your next paycheck comes, hence the name. 

You only need to show proof of income and an active bank account to get one.

How payday loans work

Payday loans work differently than other consumer and personal loans because you don’t need to have collateral to get one. You work with a physical branch or online vendor who will loan you cash based on your current income. 

The laws in each state vary for how much you can borrow and how much the lender can charge in interest rates and fees. Once approved, the funds will appear in your bank account and you’ll need to repay the loan in full, plus fees, by your next paycheck. 

Be sure to check out the specific rules where you live before moving forward with the process.

Pros and cons of payday loans

Payday loans are definitely a risky business. It’s important to understand what you’ll be getting and giving in return before applying. 


The best part about a payday loan is it does give you a large sum of cash, which can be very helpful in an emergency situation. Plus, you only need to show proof of income and an active bank account to get one – which means your credit score (good or bad) doesn’t affect anything. 


More times than not, payday loans set people up for greater debt. Because the process to obtain a loan is so easy, many people become reliant on them as a way to make ends meet. 

The loans are due back so quickly and have such high fees, it can actually backfire and end up costing you more. 

For example, the cost of a loan is usually $15 for every $100 borrowed. That means an interest rate of 15%. But because you have to pay back the loan in two weeks, the 15% charge equals an annual percentage rate (APR) of 400%! Yikes. 

For comparison, a credit card APR is typically only 12-30%.

How to get a payday loan

To start, a payday lender will verify your proof of income and bank account information. 

You’ll also need to have a valid ID and show you are at least 18 years old. The loan funds will arrive in your account within 24 hours and will need to be paid back immediately after your next payday, so typically in two weeks and up to one month. 

The loan amount is determined by the amount of money you earn and lenders will charge a very high amount of interest.

What you need for a payday loan

It’s fairly easy to get a payday loan–you just need a job, valid ID, and to be at least 18 years old. A pay stub will work as proof of income.

It is possible to be rejected from getting a payday loan, though. Here are a few reasons why that could happen:

  • You don’t earn enough money. Lenders often require borrowers to make at least $500 a month.
  • Lenders think you won’t be able to repay the loan. If a lender suspects you aren’t worth the risk, they won’t loan you the cash.
  • You already have outstanding loans. Many lenders are able to check if you’re borrowing money from somewhere else already.
  • You are active-duty military. According to federal law, payday lenders cannot make short-term loans at more than 36% APR to military members. 
  • You’ve recently gone through bankruptcy.
  • You haven’t been employed long enough to meet lender requirements.
  • You have recently bounced checks.
  • Your bank account hasn’t been open for a long enough amount of time.


Is a payday loan secured or unsecured?

Payday loans are unsecured personal loans because lenders charge borrowers a very high amount of interest and do not require any collateral.

Are payday loans fixed or variable?

Payday loans work by having lenders charge a fixed fee that is typically much more expensive than other forms of credit. 

Can you get a payday loan with unemployment?

If you’re unemployed, a payday loan might look very tempting. But, because lenders require a consistent source of income to qualify for a loan, you probably won’t be able to get one.

Unemployment benefits are only offered for a limited amount of time, so it doesn’t look very appealing to lenders. Seasonal workers, however, are more likely to obtain a payday loan.

What happens if you don’t pay back a payday loan?

If you can’t pay back your payday loan, lenders will begin to call you and send letters from their lawyers to try to get the money. 

Or, they could outsource the loan to a debt collector which could result in a civil lawsuit. They can even try to continue to withdraw money from your bank account, because they have that information already.



Hard Money Loans: Everything You Need to Know

If you’re interested in real estate or looking to grow as an entrepreneur, a hard money loan could be a way to get the cash you need (and fast, too). Keep reading to learn exactly what the process entails, plus the pros and cons.

What is a hard money loan?

A hard money loan is a loan secured by real property. It’s a way borrowers can take out a loan without using a traditional mortgage lender. 

The loan either comes from an individual or investor who lends you the money based on the value of the property you’re using as collateral. Oftentimes, this type of loan is used as a last resort or considered a short-term bridge loan, meaning the loan lasts until the borrower secures enough permanent financing.

How hard money loans work

The terms of a hard money loan are all based on the value of the property being used as collateral. Your credit history and score do not have any effect on your chances as a borrower. 

This is largely because traditional lenders, like a bank, do not make hard money loans. To get one, you’ll work with a private individual or company that would find value in giving you a loan. 

For example, this loan is commonly issued to property flippers who plan to pay off the high loan relatively quickly.

Pros and cons of hard money loans

Hard money loans have very high interest rates, so they can be a very expensive option. There are, however, pros to getting one. 

Here’s what to know:


  • Easy approval process. The hard money loan approval process tends to be much quicker than applying at other traditional institutions.

Lenders are private companies or individuals who care more about the value of your collateral than your financial situation, so they can make decisions quicker. They don’t spend as much time verifying income, bank statements, etc., and if you’ve worked with the lender before, the process can be even quicker. 

  • They’re relatively flexible. Most lenders don’t follow a standard loan process when it comes to hard money loans. 

Each borrower is evaluated on an individual basis, so your financial situation will determine a repayment schedule. 

  • Collateral is the name of the game. This is the most important factor for lenders, so if you’re investing in a property that’s worth a lot, the lender will give as much as it’s worth.

Sometimes, hard loan investors aren’t concerned with repayment because there could even be an opportunity for them to resell the property if the borrower defaults.


  • It’s very expensive. Because the actual property is the only protection against default, hard money loans have lower Loan-to-Value (LTV) rations than other traditional loans. 

For example, the LTV for a hard money loan is usually around 50% to 70% vs. a typical mortgage that has a 80% LTV. Plus, the interest rates can be very high–expect to pay rates in the double-digits.

  • More pressure to succeed. Because these loans are more expensive, it’s very important the project you’re working on (i.e. the property being used as collateral) increases in value – or at least you break even.

How to get a hard money loan

To get a hard money loan, you’ll need to connect with investors looking for new properties. Start by researching companies and individuals in your area that lend money based on collateral. Local real estate agents or investor groups can be great resources for this. 

Then reach out and inform them of your goals and needs so you can start a working relationship and apply for the money once you’re ready.

Getting approved

A traditional lender, such as a bank or credit union, is always interested in: proof you can pay them back, your credit history, and your available income.

Lenders who issue hard money loans are not. 

It’s fairly easy to be approved by a hard money lender because they lend money based on collateral and they aren’t necessarily interested in your ability to repay. They know that if anything goes wrong, they can get their money back by taking your collateral and selling it. 

This type of loan is usually considered a short-term loan and lasts from one to five years. It wouldn’t be financially wise to keep them any longer because of the high interest rates.

Tips for paying off a hard money loan

If you want to get into the world of real estate, hard money loans are a great option. But, because this type of loan is so much shorter than traditional loans and has a higher interest rate, it’s important to have a strategy to pay it off. Here are some things to consider:

  • Sell the property being used as collateral. Most times, the main reason someone would get a hard money loan is to finance their property flipping project.

The goal is to purchase a property, use it as collateral, improve the property, then sell it for a profit. This option allows you to plan and invest in the best way to maximise profits while improving the property.

  • Refinance with the lender. If your plan wasn’t to flip a piece of property but to rent it out, refinancing may be your best bet. 

This strategy gives you a longer-term plan for income rather than one lump sum. Discuss this with your lender and see what they’re open to.

  • Secure a traditional mortgage. If you want to stay in the property you purchased with your hard money loan, you should consider a mortgage. 

You can use your hard money loan to build up your credit or pay off other debts, thus increasing your chances of being approved for a mortgage from a traditional financial institution.


What happens if you default on a hard money loan?

If you default on a hard money loan, the property used as collateral for the loan will be used as the asset to pay off the loan. 

Your lender will foreclose the property, which could require you to sign a Deed of Trust, Promissory Note, or go to court to settle depending on where you live.

Do hard money loans require an appraisal?

Yes! Because the value of the property is the most important factor in receiving a hard money loan, the approval process includes an appraisal to determine what that value is.

Do hard money loans show up on credit reports?

Most hard money loans do not show up on your credit report. But because this isn’t always the case and can vary by lender, it’s important to have this conversation with whoever you’re borrowing the money from.



Personal Loans: Everything You Need to Know

A personal loan is a relatively flexible loan to be used for short-term financial needs when you don’t want to dip into your savings. Keep reading to learn exactly how they work and what you can afford to do with this type of loan.

What is a personal loan?

A personal loan is money borrowed from a financial institution (think bank, credit union or online lender) that you pay back in fixed monthly payments. 

This type of loan typically lasts between two to seven years. It’s a good option if you don’t want to rely on your savings account to cover unexpected expenses or for any non-discretionary purposes, such as debt consolidation.

How do personal loans work?

Personal loans can be relatively easy to qualify for and are based off of your credit history and income. 

The money can be used for almost anything, including expensive purchases or medical bills. You might also see them referred to as signature loans or unsecured loans because there is usually no collateral required to secure one (but more on that later). 

Once you receive the loan, the money is typically given in one lump-sum that you repay with fixed monthly payments, plus interest (of course@!) 

The interest rate — or Annual Percentage Rate (APR) — is determined by your credit score.  Higher credit scores will give you better interest rates, since your risk as a borrower is calculated using your credit score.

The interest rate is typically fixed throughout the payment period. However, some lenders have different rules so be sure to check your terms to confirm that your rate won’t change in the repayment process.

Secured vs. Unsecured personal loans

The majority of personal loans are unsecured, meaning they aren’t backed by collateral and a lender decides whether or not to give you the loan based on your credit score, history, and income. 

Collateral can be any asset that is able to be seized and sold to repay the loan (if necessary). If you can’t get an unsecured loan, your next option is a secured loan, which is backed by collateral, like your car or house.

What can I use a personal loan for?

Personal loans are very flexible in terms of what you can use them for. Here are a few examples:

  • Debt consolidation (most commonly for credit card debt)
  • Home improvement projects
  • Medical bills
  • Refinancing existing loans, or repaying family and friends
  • Special occasions such as weddings or funerals
  • Small business expenses
  • Vacations and holiday shopping
  • Divorce costs
  • Moving expenses

How to get a personal loan

The process of applying for a personal loan usually involves three steps.

  • First, pre-qualify for the loan with multiple lenders. This way, you can compare interest rates and repayment plans. You’ll need to provide information regarding the loan’s purpose, how much you want the loan to be, your ideal monthly payment, and your personal financial information (credit score, history, income, etc.).
  • Then, select the best offer. Once you decide what’s best for you, you’ll submit a formal application with the lender. This includes a photo ID, proof of address and employment, your financial information and Social Security number.
  • Once approved, you’re all set! And your lender could give you the money as early as the same day as applying.

Learn more about C&D’s Personal Loan services >

If you have bad credit:

A strong credit score will give you a better chance of qualifying for a personal loan, having a simpler time applying for one, and give you a better interest rate. 

That said, there are lenders who cater to people with bad credit profiles. If you don’t have time to improve your credit before applying for a personal loan, talk to your lender to see if they offer a fair credit or bad credit loan. These will have higher rates, but they’re available to people in a sticky financial situation.


Do personal loans affect my credit score?

Yes, just like any other kind of loan! If you make your personal loan payments in full and on time, this will help improve your credit score. Late or missed payments, on the other hand, will significantly damage your score.

How many personal loans can you have at once?

It depends on the lender. With some lenders, you can have multiple personal loans with them or even across different lenders. But, a lender could limit the amount of money they’ll give you because you may already have too much existing debt. Generally speaking though, there is no law against having a certain number of personal loans at once.

Can you refinance a personal loan?

Yes, it’s possible to refinance a personal loan. When you do this, you replace the existing loan with a new one to hopefully save money and qualify for a lower interest rate than you originally had.

Can you transfer a loan to another person?

Because a personal loan is determined by a person’s credit score and financial history, they generally cannot be transferred to another person. If your loan has a cosigner or guarantor, it is possible for that person to become responsible for the loan if you default. Doing so though would cause a lot of damage to your credit score.

What happens to personal loans when the borrower dies?

If a personal loan is still not paid off by the time the borrower dies, then the borrower’s estate is responsible for the remaining balance of the loan. If the loan had a co-signer, then that person would be in charge of paying off the loan.



Bankruptcy: Everything You Need to Know

Bankruptcy is a scary word. But it could offer the financial solace you need when a financial situation has become too overwhelming to bear. Keep reading to learn exactly what it is and how it may not be as terrifying as you think.

What is bankruptcy and how does it work?

Bankruptcy is the legal process that happens when someone or a business cannot repay their outstanding debts. It’s overseen by federal bankruptcy courts and is there to help people and businesses eliminate their debt partially or completely, or sometimes help them pay part of what they owe. This is a very complex task to undergo and shouldn’t be done without legal help!

First, you’ll need to meet the requirements to file for bankruptcy, such as showing you can’t repay your debts and also that you’ve completed financial counseling with a government-approved credit counselor. The process starts when the debtor files a petition and their debts are measured and evaluated. Then, depending on which type of bankruptcy you are filing for, the rest of the process will have its own specifications. The goal is to give you a financial fresh start, but it will stay on your credit report for many years and could make borrowing money in the future very difficult.

Types of bankruptcy

There are several different types of bankruptcy all known as chapters. They all vary in filing costs, complexities, and more.

  • Chapter 7 Bankruptcy, or Liquidation, is the most common form of bankruptcy chapter. This process does not include a repayment plan, instead, the debtor’s nonexempt assets are collected and sold to pay back the creditors. Nonexempt assets include family heirlooms, second homes, cash, and stocks or bonds. This option is applicable for people who don’t have regular income or who don’t want to use Chapter 13’s plan, which we’ll get to next.
  • Chapter 13 Bankruptcy, or a Wage Earner’s Plan, allows individuals with regular income to create a plan to repay all of their debts. This is the second most common chapter and typically takes debtor’s three to five years. 
  • Chapter 11 Bankruptcy, or Reorganization Bankruptcy, is for businesses who wish to remain open during the bankruptcy process and become profitable once again. This chapter creates new ways to increase revenue and cut costs while under court supervision. For example, a business would raise their service rates or offer more services to become profitable.
  • Chapter 9 Bankruptcy is for municipalities and political subdivisions, such as hospitals, airports, and school districts, who are in financial distress. These institutions do not have to liquidate their assets or close, but must create a plan for repaying them over a period of time.
  • Chapter 12 Bankruptcy is available to provide relief for family farmers and fisherman. It enables them to carry out their business while coming up with a debt repayment plan.
  • Chapter 15 Bankruptcy is for when the filings involve people from multiple countries. It is typically filed in the debtor’s home country.

Who Qualifies for Bankruptcy? 

Whether or not you meet the requirements to file for bankruptcy is a good way to determine if it’s a good option. The most common types of bankruptcy for an individual are Chapter 7 and Chapter 13. 

Chapter 7

To qualify for Chapter 7 bankruptcy you must: 

  • Have a monthly income that’s lower than the median income for the same sized household in your state 
  • (if the above is false) Pass a means test to decide if you have enough money to make payments to your creditors
  • Not have filed for Chapter 7 bankruptcy in the past eight years
  • Not have filed for Chapter 13 bankruptcy in the past six years
  • Complete a credit counseling course.
Chapter 13 

To qualify for Chapter 13 bankruptcy you must: 

  • Have a sufficient income to make debt payments
  • Your unsecured debt must be <$419,275
  • Your secured debt must be <$1,257,850
  • Have filed federal and state income tax returns for the past 4 years
  • Complete a credit counseling course.

When is bankruptcy a good option?

Oftentimes the word “bankruptcy” rings huge alarm bells in our brains. But, if you’re unable to repay your debts and provide necessities like food and shelter for you and your family, it may be your best option. And it isn’t the end of the world. Filing for bankruptcy means an end to collection calls, wage garnishments, potential lawsuits, and the best thing–debt!

The downside of filing for bankruptcy

Declaring bankruptcy is a scary move for many people. Yes, it can help you relieve your debts, but it has a very bad reputation–and possibly for good reason. The biggest being the fact that it lowers your credit score, making it more difficult to get a credit card, loan, mortgage, rent an apartment, or buy a business in the future. (Take a deep breath here, that was a long list!) And a Chapter 7 bankruptcy will stay public record for 10 years after you file. On the other hand, most debtor’s already have poor credit scores from late and missed payments.

Alternatives to bankruptcy

Bankruptcy is just one possible solution when it comes to unmanageable debt. These are some alternatives to consider. Keep in mind, most will still affect your credit score, but maybe not as much as bankruptcy. 

  • Ask for help. The government offers approved credit counseling or debt management plans that can work with your creditors so you can pay back what you owe.
  • Opt for a debt consolidation loan. This is the process of taking out a new loan to pay off your current debts. They typically offer better terms such as lower interest rates and monthly payment options. 
  • Talk to your creditors. They don’t want you to not repay your debts either, so communicate with them to see if they’re willing to renegotiate a repayment plan you can actually manage.

How to file bankruptcy

All bankruptcy cases go through the federal court system as outlined in the U.S. Bankruptcy Code. You can file for bankruptcy on your own, however, it’s best to work with a bankruptcy lawyer. There will be filing costs and legal fees, but free services are available for those who qualify. The process includes:

  • Compiling your financial records. This includes listing all debts, assets, income, and expenses to give the courts and whoever’s helping you a good sense of your situation.
  • Getting credit counseling within 180 days before filing. You actually can’t file for bankruptcy until you’ve gone through this requirement. It shows the courts that you’ve done everything you could before filing bankruptcy as a last resort.
  • Filing the petition. And if you haven’t found a lawyer, this is the time to do it if you want one. Without legal advice, you run the serious risk of not knowing all of the federal and state laws which could affect the outcome of your case. 
  • Meeting with your creditors. Once your petition is accepted, the case will be assigned to a bankruptcy trustee who will set up a meeting with your creditors. This will give them the chance to ask questions about your case.


How long does it take to file bankruptcy?

The amount of time it takes to file bankruptcy and complete the process varies by chapter. It will also depend on your financial situation and the amount of debt you have. Generally, a Chapter 7 Bankruptcy can take three to seven months, and Chapter 13 Bankruptcy is anywhere from three to five years.

Can you file bankruptcy on medical bills?

Yes! But you can’t limit your bankruptcy case strictly to your medical bills. When you file, be sure to list all of your debts, and that includes medical bills. They are considered non-priority unsecured debt, meaning it can be forgiven.

How long after bankruptcy can I buy a house?

The length of time it takes to buy a house after bankruptcy depends on the type of bankruptcy you filed for and the type of mortgage loan you’re applying for.

This is because bankruptcy can severely affect your ability to obtain unsecured credit, and even if you do get it, lenders may charge you higher fees and interest rates. Another option may be to reaffirm your current mortgage during the bankruptcy proceedings so you can keep your home and continue paying that mortgage.

Do you need a lawyer to file bankruptcy?

You don’t have to have a lawyer to file for bankruptcy, but the only person that comes to mind who represented themselves in a court of law without one is Ted Bundy. (Yikes.) Bankruptcy has long-term financial and legal consequences, so it’s very important you have a qualified lawyer to guide you along the way.



Debt Consolidation: Everything You Need to Know

When you’re in over your head with student loan payments, credit cards, and more, paying off debt can seem nearly impossible.

Debt consolidation might be an option for you if you need help digging yourself out of a hole. Keep reading to learn more.

What is debt consolidation?

Debt consolidation is the process of taking out a new loan to pay off other debts you owe. This option ideally offers a better payoff deal than your old debts original terms, such as lower interest rates and monthly payments. 

It’s a great way to pay back overwhelming credit card debt, student loans, and other liabilities.

How does debt consolidation work?

The first step to starting debt consolidation is to visit your bank, credit union, credit card company, or online personal loan provider to apply for a consolidation loan. If you have a good history with the institution you’re applying at, it should be easier to get the loan. If you aren’t approved, you could try private lenders or mortgage companies. 

Once you have the loan, it will enable you to pay off all your debts through that single loan. Many creditors are willing to do this because it increases their chances of actually collecting the debts. 

Your new loan will be refinanced with an extended repayment period, so keep in mind you will likely be in debt for a longer period of time. Plus, a lower interest isn’t’ always guaranteed, so be sure to read the fine print with your financial institution. 

To sum up the debt consolidation process: 

Step 1: Apply for a loan with a trusted lender 

Step 2: Take out the loan with the lowest rates and best terms

Step 3: Use your loan to pay off your existing debts. 

Different types of debt consolidation explained: how to consolidate debt

There are different kinds of debt consolidation loans and each have their own set of pros and cons. Learn which could be right for you.

1. Debt Management Plans

Debt management plans are a solution for anyone struggling to pay their bills every month. They work by combining all of your unsecured debts into one monthly payment that you can pay off in three to five years. The interest rates, monthly payments, and late fees are lower and you pay a credit counseling agency, who will then pay the creditors the agreed-upon amount.

Learn more about Debt Management Plans>

2. Debt Settlement

Debt settlement is very different from debt consolidation. Like we said, consolidation is a loan that lumps all your unsecured debts into one single payment. Settlement, however, is when you work with a company to negotiate a lump-sum settlement payment with your creditors for less than the original amount you owe. These companies charge a fee for their service, and oftentimes it’s between 15-20% of your total debt. They do not make any actual payments to your credit institutions, they only try to negotiate your current debts.

Learn more about Debt Settlement >

3. Debt Consolidation Loans

If you’re having trouble managing all of your outstanding debts, a debt consolidation loan may be an option. Banks and private lenders offer these in two different forms: secured and unsecured. A secured loan is backed by one of your assets, like a car or house, to act as collateral. An unsecured loan is not backed by any assets and is more difficult to obtain. They also have higher interest rates and lower qualifying amounts, although the interest rate is still typically lower than what is charged by credit card companies and financial institutions.

Personal loans

Personal loans can be used for just about anything, including paying off your debt! The lender may ask you what you’re planning to do with the money, but most will just want to know you’ll be able to pay it back. 

They aren’t secured by collateral and can be relatively inexpensive compared to other loans.

Learn more about personal loans >

Other types of loans

We recommend exploring the options above before tapping into retirement funds and your home value. That said, it’s important to understand all of the options below. 

401(k) loans

A 401(k) loan is when you borrow money from your retirement savings account. Every employer’s plan is different, but it’s typically a fast and convenient way to get the money you need. You’ll have to pay back the borrowed money with interest within five years of taking the loan, depending on your employers terms. 

Home equity lines of credit (HELOCs)

A home equity line of credit (HELOC) is a second mortgage that allows you to access cash based on your home’s value. Similar to a credit card, they’re pretty flexible in that you can borrow as much as you need up to your home’s equity. These also have flexible interest rates. 

To get one, you need a credit score of 620 or higher, a home value that’s at least 15% more than what you owe, and a debt-to-income ratio that’s 40% or less.

Home equity loans

A home equity loan is when you borrow money using your home as the collateral. The money comes as a lump-sum payment and you repay the loan with a fixed-rate interest during a predetermined amount of time. 

The amount of money you can borrow is usually determined by your income, market value of your home, and your credit history. A bank, credit union, mortgage company, and mortgage broker are all options to consider taking a loan from.

4. Balance Transfer Credit Cards

If you don’t want to take out a loan, you might consider consolidating all of your credit card payments onto a new credit card. This could be a good idea if the new card charges little to no interest or if there is a $0 annual fee and $0 transfer fee.

When is debt consolidation a good option?

When considering whether debt consolidation is a good idea for you or not, think about your current situation. If you’re juggling multiple bills with different payment amounts, interest rates, and due dates, consolidating everything into one lump-sum payment might be a good idea. Especially if you can get a lower interest rate than what you already have.

“What type of debt consolidation option is best for me?”

The two most common (and least risky) ways of consolidating debt both involve lumping all your current debt payments into one monthly bill. 

The first is to move all your debts to a 0% interest balance-transfer credit card and be sure to pay it in full each month. You’ll most likely need a credit score of 690 or higher to qualify. 

The next option is to apply for a fixed-rate debt consolidation loan at your financial bureau. Then, use that money to pay off your debt while paying off that loan in set installments. These loans don’t require an excellent credit score, but the higher the score, the lower your interest rate will probably be.

Risky debt consolidation options you should avoid:

Debt consolidation isn’t a perfect solution for overwhelmed debt and doesn’t always work. Here are two loans to be wary of because they put two very important things at risk–your home and your retirement.

401(k) loans

A 401(k) loan allows you to borrow money against your retirement savings account, so it should be used as a last resort when you need to pay off debt. 

This option is appealing because of it’s low-interest, but it could totally derail your retirement savings. The amount of money you borrow won’t be growing compound interest that could benefit you in the future. There could also be potential tax consequences and penalties for this type of loan if it’s not paid back. Plus, you’ll still have to pay back the balance of the loan if you leave the job.

Home equity lines of credit (HELOCs) & home equity loans

Using home equity lines of credit (HELOCs) or home equity loans relies on your home as collateral, so it can be a risky option to consider. 

Let’s start with HELOCs — like we said, these are structured similar to credit cards in that you can access cash based on your home’s value. They have a low, variable rate but because you can take out different amounts at different times, they’re harder to budget for. 

Adjustable rates also mean that your payments could increase, leading to deeper debt in the long run.

A home equity loan can be a good idea depending on your financial situation, but nonetheless, you should proceed with extreme caution. With this loan you’ll have a fixed rate and a set payment schedule, so it’s easier to budget for. 

But, if you miss a payment or are late, it could put you in danger of losing your home. And if you decide to sell while the loan is still in place, you’ll have to pay the entire balance at once.


Does debt consolidation hurt my credit?

If you make your loan payments on time every month and pay more than is due, it could help improve your credit score. 

But if you continue unhealthy spending habits like spending more than your line of credit, or you’re late with your payments or completely miss them, this will hurt your score.

Can I consolidate my debt before applying for a mortgage?

Yes, but patience is key. Consolidate your debt well in advance of buying a home so you’ll be more likely to be approved for a mortgage. 

If you pay off your consolidation loan on time and in the full amount, your credit score will increase, which looks great to mortgage companies. It shows you will be a responsible borrower.

Can I refinance my mortgage to consolidate debt?

You can refinance a mortgage to pay off debt, but you’ll want to make sure you have enough equity. A good rule of thumb is if you’ll end up owing more than 80% of your home’s value after you refinance, hold off because you’ll have to buy mortgage insurance. You need 20% equity in your home to avoid mortgage insurance.

Can I file bankruptcy on debt consolidation?

They are two different things! Bankruptcy is a legal process overseen by the federal courts and designed to protect individuals and businesses overwhelmed by debt. It does major damage to your credit score, so another viable option is debt consolidation. 

You’ll only want to file for bankruptcy if you cannot consolidate your debt. Speak with a debt coach or a lawyer before going down this path.



Watch Out! Debt Collectors Can Take Your 3rd Stimulus Check. What Can You Do?

The third round of stimulus checks for COVID-19 relief started going out this past weekend after the bill was signed on March 11th

But will you see that precious #StimmyCheck? If you have debt in collections, your check might disappear before you even realize it ever hit your account. Keep reading to learn the latest updates.

How can debt collectors take stimulus check payments?

Debt collectors may be able to take your stimulus check depending on the type of debt you have.

While the last stimulus check was protected from garnishment by debt collectors, the 2021 Economic Impact Payment (3rd stimulus check) doesn’t have the same protections.

Unfortunately, this lack of protection could severely impact those who need it most. There are ongoing efforts to close this loophole — letters to Congress members and offices — but for now, those who may be impacted should prepare.

Is your #stimmy at risk? Here’s what to do.

Your stimulus money isn’t at risk of being taken to pay back taxes, child support, or government debts. But private debt collectors are not explicitly exempt from going after your stimmy as soon as it hits your bank account — so what can you do?

1. Pay your bills early

Start checking for your stimulus payment to hit your bank account over the next few weeks. Track your payment on the Get My Payment tool. Chances are, debt collectors will act fast — you’ll have to be diligent if you need to prioritize your spending to pay for rent, food, or other bills just in case.

However, if you are able to pay your debts, you should do that — otherwise, you are only hurting your credit score and racking up interest payments, which will cost you more money in the long run.

Break up with your debt just like Noah did.

2. Settle your debts as soon as you can!

Large amounts of debt, like loan debt or credit card debt, can be a huge distraction in these trying times. If you’re able to, we’d recommend you make a substantial payment towards your debt with this stimulus check.

While there’s a lot to consider, your #StimmyCheck can be a catalyst to help you get back on your feet!

Relieving yourself from the debt of stress is rewarding, and you don’t need to be a financial expert to get back on your feet. Reach out to a C&D financial coach, or look into debt relief solutions or credit building tactics.

3. Close your bank account

If your check hasn’t hit your account yet but it’s scheduled for direct deposit, you could close your bank account. This would cause the IRS to send your check via snail mail, which prevents it from being garnished. If you take this route, then you’re likely looking at a delay in your payment arrival so, that’s something to consider as well. 

Understanding the 2021 Economic Impact Payments

Stimulus checks will pay out $1,400 to individual taxpayers that earn under $75,000 annually, and $2,800 for joint filers making up to $150,000 annually — plus an additional $1,400 for every dependent, contingent on the following:

  • 2019 Taxes (if you have filed for 2020 already, they’ll use that one)
  • 2020 Taxes (if you haven’t filed this year’s return yet, they’ll look at 2019 taxes, and make up for the difference in this year’s tax return)
  • Number of dependants
  • Amount you received in 1st and 2nd stimulus payments (read more about the Recovery Rebate Credit)
  • Your income level (phased out)
    • If you make more than $75,000 individually, but less than $80,000 individually, or more than $150,000 jointly, but less than $160,000 jointly, you may still be eligible for a “phased out” stimulus check.

For the latest updates on the third stimulus check and the 2021 Economic Impact Payments, visit the Get My Payment page on



Debt Management Plans: Everything You Need to Know

A Debt Management Plan (DMP) can help manage your payments and even reduce your accruing debt, and is one of many debt relief solutions available. If you’re having trouble paying your bills every month, a DMP might be exactly what you need. Keep reading to learn more about how it works.

What is a Debt Management Plan?

Debt Management Plans are defined as “an agreement between a debtor and a creditor that addresses the terms of an outstanding debt.”¹

It’s a debt solution that combines your unsecured debt payments into one monthly payment and allows you to pay off debt in three to five years by reducing interest rates, monthly payments, and late fees.

If you’re struggling to pay off credit card debt or unsecured loans, a DMP can be a magical alternative to bankruptcy. You will make one monthly payment directly to your credit counseling agency, who then will pay the creditors an agreed-upon amount.

How do Debt Management Plans work?

Debt management plans work by discussing your current financial situation with a credit counseling agency who will then create a plan to pay off the amount you owe to creditors. The process starts by having a consultation with a financial coach who will review your current finances and help you understand your options. 

Your coach can then negotiate with your creditors on your behalf to create new payment plans, such as reducing minimum payments, lowering interest rates, and stopping late fees. Then, rather than pay your creditors separately each month, you pay a one-time monthly payment to the credit counseling agency. The goal is to do so in a way you can afford and ultimately become debt-free while the creditors get paid. It’s a win-win. 

Learn more about C&D’s Debt Management Plan services >

Can creditors refuse a DMP?

A creditor does have the right to refuse any Debt Management Plan sent to them. Each company has its own set of rules for what they will and will not accept. That said, even if your account hasn’t always been in great standing, there’s still a change your creditors will work with you.

How long is a Debt Management Plan?

The timeline for full repayment is often three to five years. The timeline depends on how much debt you have and how much you can afford to pay each month. 

Do DMPs really work?

Debt management plans can help someone struggling to pay back overwhelming amounts of unsecured debt. But, these plans are not for everyone. 

Depending on your situation, bankruptcy or another form of debt relief may provide even more benefit. We recommend consulting with a professional to understand all of your financial options.

What are the benefits of a Debt Management Plan?

Here are some of the benefits you may find from a DMP:

  • Reduced stress.

Having debt without a plan to pay it off can feel like a never-ending cycle. With professional advice, you’ll be able to create financial goals, review your budget, and figure out the options to best serve you in the future. 

  • Waived fees and lower payments.

A financial coach can negotiate with your creditor to waive fees and lower your monthly payments, which will help pay off your debt faster and create space in your budget for other necessary expenses.

  • You’ll pay off debt faster.

If your coach can negotiate a lower interest rate, a larger percentage of your payment will go to your debt balance, meaning less debt more quickly.

  • It’s a one-time monthly payment.

Managing one bill is much easier than trying to stay on top of multiple bills from several different creditors. 

  • You have someone on your side.

Your coach is there to help you, not pressure you into a more difficult financial situation. Unlike some debt relief solutions, it’s comforting to know someone is there to have your back and keep you on track to success.

Disadvantages of a Debt Management Plan

Here are some other factors to consider when deciding if it’s the right decision for you.

  • DMPs only resolve unsecured debt. 

Mortgages, car loans, student loans, and most medical bills are often not covered with Debt Management Plans.

  • You can’t have open credit cards. 

Plus, applying for a new credit card during this period may lead creditors to cancel the agreement made with your financial agency.

  • A missed payment can end it.

Sticking to the plan you and your coach made is essential to ensure your Debt Management Plan isn’t cancelled by missing a payment here and there.


Are Debt Management Plans legally binding?

Debt Management Plans are an agreement between you and your credit counseling agency. If you’ve enrolled in a DMP and are struggling to stay on track, contact your coach and explain your circumstances as soon as possible.

Does a Debt Management Plan affect your mortgage?

A Debt Management Plan doesn’t include secured debts (a.k.a debts secured against property that you own like cars or other property), so it won’t affect your mortgage payments. Before committing to a DMP, you will work with your financial coach to make sure the amount you pay towards your mortgage will be factored into your budget. This way, you’ll reach an affordable figure to pay back to creditors instead of continuing to struggle to pay all your bills.

Can you get a mortgage after a Debt Management Plan?

You’ll be able to get a mortgage more easily than you would have if you’d applied prior to completing your Debt Management Plan. This is because you won’t have any unsecured debt to worry about and you’ll have your full income available to use for a mortgage plus other expenses.

How will a Debt Management Plan affect my credit rating?

Short answer: a Debt Management Plan won’t directly impact your credit score. 

In fact, ensuring that your accounts are paid on time will likely give your credit score a boost. These plans do require you to make monthly payments, so if you don’t stick with it, there can be significant negative impacts on your credit history and score. If your Debt Management Plan includes your creditors re-aging your past due accounts and setting them as current, your monthly DMP payment will ensure payments on all accounts included in your DMP. This will help you build a positive payment history, thus making your credit score higher. Also, you’ll be repaying your accounts in full, which is better than settling your debts for less than the full amount owed. 

One important factor to consider is closing your account(s). This could increase your credit utilization ratio, or the percentage of your total available credit on all the accounts (like credit cards) you’re currently using. You want a lower utilization ratio to keep your credit score high, so closing credit cards can decrease your available credit. The impact this has varies person-to-person and depends on your exact situation, so be sure to talk with your coach about this first.

How much do Debt Management Plans cost?

You can stop holding your breath! Debt management plans are always either free or low cost. There may sometimes be an enrollment fee of $50, and sometimes there’s a monthly administrative fee, which maxes out at $75. It all depends on what state you live in, so be sure to ask up-front. Most times, your interest savings can cover these costs.



Debt Settlement: Everything You Need to Know

Debt Settlement is one of many debt relief solutions at your disposal for getting out of debt and rebuilding your credit. Ready to learn more? Read on to learn how it works.

What is debt settlement?

Debt settlement is defined as “an agreement between a lender and a borrower for a large, one-time payment toward an existing balance in return for the forgiveness of the remaining debt.”¹

To put it simply, you make a deal with your creditor or lender to accept one large payment instead of your full debt amount.

How does debt settlement work?

Debt settlement works by negotiating your current debt with your creditors (lenders) and debt collectors. The goal is to lower the amount you owe into something you can afford to pay so that you become debt-free and the creditor gets paid.

When you use debt settlement negotiation services from a reputable company, they negotiate on your behalf. Alternatively, you could negotiate directly with your creditors and attempt to settle your debt on your own. Read on to understand how negotiation works.

You may find it helpful to speak to a financial coach to explore your options and determine if you’re a good candidate for debt settlement.

Learn more about C&D’s Debt Settlement services >

How to negotiate debt settlement

Before you can negotiate your debt, your accounts usually need to be delinquent by at least 90 days. It’s common for creditors to sell your debt to a debt collector at around 180 days, so your window to negotiate is often within 90 to 180 days of delinquency.

Additionally, you’ll need some money saved to settle your debt. Some creditors accept payment plans, but usually, you’ll pay a lump-sum that’s less than the amount you owe. 

Using debt settlement negotiation services

Negotiating on your own can require a considerable amount of effort and time, which is why many people seek out professional services.

There are many benefits to using a debt settlement company to negotiate your debt vs. doing it yourself. If you’re new to debt settlement then you may find it easier to have a professional negotiate on your behalf. Additionally, debt settlement companies can customize debt relief plans based on your goals, your total debt, and your budget. Guidance from a professional service provider will ultimately help you stay on track to eliminate your debt and reach your financial goals.

When choosing a debt settlement company, it’s important to ensure that they are compliant with the Federal Trade Commission regulations for the industry. Consider the amount of time they’ve been in business, ask questions about negotiation fees and associated costs, and look for honest reviews about the business. Our coaches have experience with some of the most trusted debt settlement companies so, if you have questions, you can reach out and ask us, anytime!  

How to negotiate a debt settlement on your own
If you choose to do a DIY debt settlement, there are some things you should know:
  1. You’ll need to negotiate how much you can pay.
  2. You’ll need to negotiate how it’ll be reflected on your credit reports.

Be prepared to make a few calls before you come to an agreement. You’ll need to be convincing and purposeful in your approach to persuade them. You’re ultimately trying to convince your creditor that it’s worth it for them to reduce your debt, and you may not be able to resolve the settlement with just one conversation. 

If you previously sent a hardship letter, your creditor may already have an understanding of your financial situation or life events that may have affected your ability to make payments. If not, you’ll need to clearly outline the financial hardship that you’re experiencing when you’re negotiating.

Lastly, it’s crucial to get all the terms outlined in writing from your creditor before you make a payment. This holds the creditor accountable to honor the agreement, and holds you accountable to pay according to the debt settlement plan.
Because each financial situation is different, we’d highly recommend you speak to one of our certified Financial Coaches to explore your options. Talking to our coaches is always free – just sign up and request a coaching session right from your personalized Money Sensei™ dashboard! 

Is debt settlement worth it?

Debt settlement is not for everyone, but it could be worth it if you’ve explored all of your options, as there are many pros and cons to consider:


  • It helps you lower your debt
  • It reduces multiple monthly payments into one monthly payment
  • It helps you avoid bankruptcy, and provides better repayment terms than bankruptcy
  • It helps you stop creditors and collectors from contacting you


  • Your creditors might not negotiate your debt
  • You could end up with more debt (interest and fees still accrue during the negotiation process)
  • Forgiven debt may be considered taxable income
  • Your credit score may be negatively affected

Debt settlement FAQs

Am I eligible for debt settlement?

You may be eligible for debt settlement if you have more than $7,500 in unsecured debt. Our coaches can help you determine if debt settlement is a good fit for you.

How long does debt settlement take?

Debt settlement can eliminate debt in as few as two to four years. Compared to other debt options, which could take up to 9 years to eliminate debt.

How much does debt settlement affect your credit score?

Debt settlement can lower your credit score by up to 100 points at first, with less of an affect as time goes on. The impact of debt settlement on your score varies based on your current credit standing.

How long does debt settlement stay on your credit report?

Debt settlement stays on your credit for up to seven years. The impact on your score minimizes overtime.

Can I buy a house during debt settlement?

If you are pursuing debt settlement, to begin with, then you’re likely unable to make payments on existing debt. Your credit score was negatively affected (or will be), and it’s unlikely you’ll secure a mortgage at the best available terms. While you could try to purchase a home during debt settlement, it’s a better idea to take care of an existing debt, repair your credit score, and purchase one after debt settlement.



Is Debt Settlement a Good Idea?

Debt settlement is often portrayed by settlement companies as a magic bullet for anyone drowning in debt. But the truth is, debt settlement is only an ideal debt solution if :

  • You have $10,000 or more unsecured debt
  • You’re frequently late on debt payments
  • You’re having trouble making the minimum payment amounts every month
  • You cannot afford your debts and are considering bankruptcy

There is a difference between debt management and debt settlement, so make sure you know which one is right for you. 

How Does Debt Settlement Work?

If you decide to use debt settlement to handle your debts, you or a third-party company will reach out to your creditors to negotiate a new repayment plan. This new payment plan will be based around a smaller total amount than your original debt. In exchange for paying less, you instead agree to make a single, lump-sum payment to pay the debt off completely.  Once the agreed-upon amount is fully paid, your account is marked “settled” on your credit report. This process usually takes 2 to 4 years and can help you avoid bankruptcy. 

Learn More: Debt Settlement

Is Debt Settlement Bad For Your Credit?

Debt settlement can have both a positive and negative effect on your credit. For some strategies, your credit score may get worse before it gets better.

Many debt settlement companies advise you to skip your payments in order to save up to pay one large sum. However, there is no guarantee that your creditors will agree to this payment method, and they may begin to report your delinquent payments to the major credit bureaus. This results in a negative effect on your credit history and a lower credit score. 

As you pay off the debt, your credit report will begin to show active, on-time payments over time. This shows that you are responsibly using your credit and will reflect positively on your credit score. 

Furthermore, using debt settlement is one of the main ways to avoid filing for bankruptcy. While debt settlement notations stay on your credit report for seven years, bankruptcy notations stay on for 10 years.  Bankruptcy has a longer-lasting effect on your life regardless of the changes you make. 

Alternatives to Debt Settlement

According to a study by the American Fair Credit Council, 95% of debt settlement clients receive savings in excess of fees, with an average save of $2.64 for every $1 in fees paid. With statistics like these, you might believe that reaching out to a debt settlement company will help you get rid of debt and fix your credit once in for all. 

However, debt settlement does not work for everyone. Every financial situation is unique and may require a specific way to handle your debt issues. There are several debt solution alternatives to look into before you decide on the best course of action:

Debt Management Plans

A debt management plan (DMP) is a program aimed towards helping you pay off your debt fast. Entering a DMP will give you access to a qualified coach who will help you:

  • Create a budget
  • Create a financial plan that fits your needs
  • Track your progress
  • Work with creditors on creating better payment plans
  • Stop collection calls

Unlike debt consolidation, you do not need good credit to qualify for a DMP. While this program does not have any direct effect on your credit, the actions you take while in the program may have a temporary negative affect. However, if you stay on the plan and make on-time payments, your credit history will improve over time. 

Debt Consolidation

Debt consolidation is the act of taking out a loan to pay off multiple debts at once. This would eliminate the need to pay multiple monthly payments and instead only require you to pay one. 

Ideally, this new loan would have a reduced interest rate and will help you pay off your debts quickly and efficiently. 

However, not everyone is qualified for debt consolidation. You need to have a high credit score and a good debt-to-income ratio. If you’re already experiencing financial difficulties, you may not qualify for a debt consolidation loan. 

Balance Transfers

A balance transfer is the process of paying off one credit card debt with a new credit card. There are several benefits to moving your debt from one card to another, including:

  • Consolidating multiple payments into one payment 
  • Potentially receiving a lower interest rate
  • Earning rewards points on a new card for repayment

However, you should be careful before you apply for a second or third card. New cards typically come with 3-5% balance transfer fees. These fees are added to any other fees you may be required to pay, including signup fees or APRs. 

And while signing up for a new card may give you a better interest rate, it may only be an introductory rate. When the introductory period expires, your interest can shoot up to be much higher than the rate you paid before. This encourages you to completely pay off your transferred credit card balance before the promotional period ends. 

Finally, there is the danger of falling into the moving-debt-around habit. Every time you transfer debt from one card to the next, the debt does not go away. In time, you may find that you’ve paid more in fees and added interest than the original amount owed. This path can quickly move you towards bankruptcy. 

DIY Debt Negotiation

If you feel confident, you can also tackle debt negotiation by yourself. This could help you avoid having to spend any more money on third-party fees. 

However, your lending company is under no obligation to provide any alterations of your loan terms. Negotiating for an alternative payment plan or lower fees may not work. 

Before you talk with your creditor directly, take a look at all of your debts. Organize them by size, length, and repercussions for not paying. This will allow you to decide which debts to negotiate for first. 

When you reach out to your creditors, provide alternative pay-off terms that you wish to use. This may include paying a smaller amount every month, a lump-sum settlement amount, or a settlement in installments. You can also request an end to collection calls and letters.

Remember to document every step of your process, and bring any sort of documented proof of income with you. The Consumer Financial Protection Bureau ‘CFPB’ of the U.S. Government advises that you record your conversation with the debt company (with their consent) so you have proof of the agreement.


Some people have enough money to pay the bills but struggle with handling it correctly. Luckily, the best way to determine if you actually can afford your debts is to sit down and create a budget. 

To set up a budget, start by tallying up how many monthly bills you have and subtracting it from your monthly income. Keeping these bills and due dates written down will help you keep track of what you need to pay and when. It will also help you determine how much money you have leftover each month to do whatever you would like with. 

Need some help setting up a budget? Take our free budgeting class. This course includes the basics of budgeting, tracking your spending and establishing goals.

Credit Coaching

Whether it’s a job layoff or a medical emergency, maxing out your credit cards when you need help can seem like the smart move. But if using credit cards is your go-to answer, offers free credit coaching that provides you with personalized financial guidance. Our coaches review your entire financial picture, including your budget and all your debts, and help create a plan that’s right for you.

Learn More: Credit Coaching

Find the Debt Solution That’s Right For You

If you’re struggling with debt, you may be looking for a way to fix things fast. While debt settlement may seem like a cure-all for your needs, there may be better options available. 

Don’t make the mistake by taking the wrong financial path. Reach out to one of our debt coaches and learn how you can take control of your debts and become debt-free fast. Re-start your future today.



How a Debt Management Plan Affects Your Credit: Pros and Cons

Paying off large amounts of debt can be a daunting task. If you’ve recently fallen behind on payments, have more cards than you can manage, or have payments that are too high, rest assured – you’re not alone. 

There are a number of debt relief options available for those looking for help to get out of debt fast. One of the most effective options is using a Debt Management Plan (DMP). 

But do debt relief programs like Debt Management Plans hurt your credit? Before deciding which debt relief option is best for you, be sure to explore the following pros and cons of using a debt management program. 

How Does Debt Relief Work?

Debt relief (or debt settlement) is a program offered by third-party debt relief companies to borrowers struggling to make debt payments. Typically, these companies encourage borrowers to use money meant for debt repayment for savings or for other bills and obligations.

While the borrower is saving, the company attempts to negotiate with creditors for lower interest rates and monthly payments on the remaining amount is owed. In theory, this creates a more manageable payment plan for the borrower and a full repayment for the lender.

However, these programs do not always go as planned. Many times debt relief companies are not able to negotiate a lower payment for all of your debts. This can have a drastic effect on both your credit and your financial security:

  • You may end up paying large fees to the third-party company
  • You may incur late fees on the debts you owe
  • You may burn bridges with future creditors
  • You may have to pay fees in a third-party bank account
  • You may have a debt collection lawsuit filed against you
  • You may have a negative impact on your credit score

How Do Debt Management Plans Work?

An alternative to a debt relief program is a Debt Management Plan (DMP). Credit counseling companies such as offer Debt Management Plans to borrowers who are struggling to make multiple or high monthly payments. 

Unlike many third parties, works directly with every client to determine the best ways to handle every financial situation. If you qualify for a DMP, a debt coach will negotiate with creditors on your behalf to help get you lower interest rates and monthly payments. 

When you agree to take part in a debt management program, you also agree to close all of your current credit accounts. A notation is made on your credit history to indicate to lenders that you are on a DMP and cannot have any new lines of credit. This notation is removed once you complete or exit your DMP. 

How Does a Debt Management Plan Affect Your Credit?

The idea of having a notation on your credit history may initially send up red flags. But while a debt management plan does have an effect on your credit history, it does not have a lasting negative effect on your credit score.

When you agree to close all of your credit accounts, your credit history stops. Lenders and credit agencies like FICO and VantageScore use your credit history to generate a credit score. A temporary pause in your available credit may have a negative effect on your score.

However, once you’ve left your DMP, the freeze on your credit is removed, and you can continue to apply and use your credit. The notation signifying your DMP activity does not have a negative effect on your score going forward – in fact, it may suggest to lenders that you actively work to pay all of your debts to the best of your ability.

Additionally, DMPs are designed to be paid off with regular monthly payments over approximately 4 years. When you sign up for a DMP, your monthly payments are automatically taken out of your bank account every month. These timely payments over the course of years will have a very positive impact on your payment history. 

Credit Score Breakdown

If you’re curious to see exactly how much of an effect a DMP has on your credit score, take a look at this approximate credit score breakdown:

  • 35% of one’s score is payment history, which will be positively affected as long as DMP payments are made on time every month
  • 30% of the score is based on amounts owed, or credit utilization,  which will be positively impacted as the balances are paid down
  • 15% of the score is the length of credit history, which will suffer under a DMP when accounts are closed
  • 10% of credit score is based on inquiries for new credit, which the client will not have while on a DMP
  • 10% of a credit score is one’s credit mix, which is unique to each individual

You should also keep in mind that a DMP has required monthly payments. If you do not continue to follow your plan, there will be a significant negative impact on your credit history and subsequently your credit score. 

Learn more: What is a Good Credit Score?

Debt Management Program Pros and Cons

Debt Management Program Pros and Cons

Doesn’t directly impact creditWill not be able to get new credit
Provides debt solution without direct impact to credit scoreAffects the length of credit history
Consistent monthly payments improve credit scoreAll credit account will be closed
Amount of debt will be significantly reduced
Debt is paid off significantly faster

Enrollment in a debt management plan doesn’t affect one’s credit score. However, certain facets of the program — timely payments, closing accounts, smaller amounts owed, and changes in utilization rate — may impact one’s score in both negative and positive ways.

Ultimately, clients who graduate from our Debt Management Plan have little trouble securing new credit and loans. If you’re ready to take control of your financial freedom, contact our expert debt coaches today.