All businesses—from small start-ups to large corporations—have their own share of financial liabilities. But what often distinguishes a successful and profitable organization is how it deals with its debts.
This is where debt management plans come in. Also known as DMP, this plan offers a debt restructuring solution that allows business owners to slowly settle their liabilities without crippling company cash flow.
In addition, a good debt management plan offers many benefits that business owners can enjoy:
When you enrol in a debt management plan, you will be able to consolidate all your unsecured debt so you will only need to make one payment every month. This effectively eliminates the hassle of having to juggle multiple bills and keep track of several due dates.
There are also some plans that allow you to set up automatic payments to make sure your bill is always paid on time.
By using a DMP, you are showing your willingness and intention to pay off all of your debt. This reassures many creditors and in return, they are often prepared to reduce interest rates—between 6% and 10%
Some creditors are even willing to mark your overdue accounts as “current” after they have accepted your DMP and have received three consecutive debt payments.
Aside from cutting down interest rates, using a debt management plan can also help you eliminate penalty fees. Your credit counsellor can negotiate with your creditors and convince them to waive any additional charges put on your account due to late or missed payments.
This way, you can focus only on paying the amount that you actually owe and get out of debt faster.
Although financial situations differ from one business to another, good debt management plans can usually help your credit rating. When you enrol in a DMP, the debts you include can no longer be penalised on your credit report.
This means that if include all your debt in the DMP and ensure your payments are on time, your credit score will cease to decline. Plus, once you successfully complete all your DMP payments, you will be able to build a positive credit history and potentially increase your overall credit score.
There’s no doubt about it, debt management plans are one of the most effective tools you can use to eliminate debt and ensure a better financial future for your business.
For more useful tips on how to properly manage business debt, check out this article on our blog.
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