Fintech debt management refers to the application of financial technology in debt management. To understand fintech debt management, you need to understand debt management among other key concepts.
Debt management involves a formal agreement between a creditor and a debtor addressing the terms of an existing debt. The agreement is referred to as a debt management plan. Debt management is beneficial to both the debtor and the creditor. To the creditor, it helps reduce the number of unsecured debts ultimately helping them regain their financial control. On the other hand, the debtor benefits in a number of ways such as securing lower interest rates, a long period of repayment and a reduction in the amount of debt to be repaid.
Debt management is most useful to consumers with numerous credit cards and unsecured debts. Usually, a credit counselling agency will develop a debt management plan for you. The plan consolidates all your debts so that you make a single monthly payment to them and then they will subdivide the amount among all the creditors in accordance with an agreed plan. This helps the debtor to continue repaying their debts at affordable rates that do not lead to undue financial strain. In the end, the debtor will have paid all the debts and regains financial freedom.
Fintech debt management makes use of technology as opposed to the traditional credit counselors. It involves the use of a program that can be customized to your situation based on your income and debts information. Most debt management programs allow you to view a list of all your existing debt balances, interests as well as the years that you will need to pay off. Existing creditors can be removed and new ones can be added as you may require. For example, if you have settled a certain creditor’s debt at once, the creditor can be removed, and where you become indebted to a new creditor, he/she can be added to the program.
Fintech debt management also includes online and mobile debt counselling services. You no longer have to meet a counsellor physically to get their services.
Benefits of Debt Management
- Debt management helps you to be more organized because you are required to pay only a single bill which will then be distributed among all your creditors. Having several debts which should be paid on different dates may prove disastrous where you forget and skip some due dates as the creditor will slap you with late charges which increase your debt further.
- Fintech debt management may give you a break from creditors’ harassing calls. Similarly, it diminishes your vulnerability to late payment fees.
- Lower interest rates
- Reduced monthly payment due to reduction in interests
- Does not affect your credit score
Some Leading fintech debt management companies are GreenPath Debt solution, inCharge Debt Solutions, and Cambridge Credit counselling.