Debt Management Program Guide
Consolidate debt, regardless of low credit or limited income.
What is a debt management program?
A debt management program (DMP) is a type of assisted debt consolidation. You enroll in the program through a credit counseling agency. It establishes a repayment plan to cover all of your credit cards and other unsecured debts with a single monthly payment. The agency negotiates with your creditors to reduce or eliminate interest rates and future penalties applied to your debts. As a result, you can get out of debt faster even though you may pay less each month.
How does a debt management program work?
- First, you work with a credit counselor to evaluate your debts, budget and credit.
- The credit counselor evaluates your situation to see if you’re eligible to enroll; they also review other options for debt relief that may work in your situation.
- If a debt management program turns out to be your best option, the credit counselor helps you enroll:
- The monthly payment is set based on what you can afford in your budget
- Setup fees are based on state regulations and rolled into your payment plan
- Once you find a monthly payment plan that works, the credit counseling agency contacts your creditors to get their signoff:
- The creditor agrees to the adjusted payment schedule.
- They negotiate to reduce or eliminate the interest rates applied to your debts.
- They also stop future penalties and fees.
- You make one monthly payment to the credit counseling agency and they distribute it amongst your creditors on your behalf.
- During and after enrollment, you have access to free resources to teach you better financial habits that don’t rely on credit cards.
- Once you graduate, your credit card accounts are rehabilitated and, in many cases, your credit score may be improved as well.
Get relief and results with a debt management program
Featured DMP Success Story: Kelly
Caring for a special needs child can lead to serious financial challenges. Treatment costs are often not covered by insurance. And ongoing care frequently falls to parents. Even loans and investments may be temporarily stopped. This leads to situations where you have less income and more reliance on high interest rate credit cards.
Consolidation with a debt management program helps rein in the debt so families regain control. A debt management program will consolidate credit card debt, while credit counselors negotiate with creditors for lower interest rates.
But don’t take our word for it. See how it helped Kelly’s family get peace of mind: “We know we could have been paying off that stuff for the rest of our lives if we hadn’t used the program. And now we are debt free.” – Kelly
When my son Nate was born with special needs, at first we weren’t even sure he’d live. Thankfully we were able to bring him home, but he needed hospice and in-home nursing. Machines were always running, the lights were always on. Our bills went through the roof.
My son didn’t qualify for Social Security. If there was something he needed, we had to put that on credit, too.
I had things I had to do at work, but I couldn’t keep up with them and give Nate the care he needed. I had to quit my job, so we lost my $40,000 annual salary. In just 3 years, we’d accumulated $66,000 in credit card debt.
Can YOU benefit from a debt management program?
A debt management program has a distinct advantage over other options for debt consolidation. With a DMP, you can consolidate debt regardless of your credit score. Even if you have bad credit you can still be eligible to enroll. This is different from other DIY debt consolidation solutions which require a high credit score in order to qualify for the low interest rates you need.
Benefits of a debt management program
There’s a wide range of reasons why a debt management program could be in your best interest. Here are the main reasons why people enroll:
- It can reduce your total monthly debt payments by 30 to 50%.
- You can get out of debt in 60 payments or less, on average.
- Your interest rates are typically reduced to between 0 and 11%.
Recommended reading: 6 Key Benefits of a Debt Management Program
A DMP and your credit score
Most peoples’ main concern with debt management programs are how enrollment will affect their credit scores. In most cases, as long as the program is completed successfully the effect is positive or neutral. In other words, if your credit score changes at all, it tends to go up.
Comparing the pros and cons
It’s important to note that a debt management program is not without its downsides. For example, you will have to adjust to having your credit card accounts frozen while you’re enrolled. However, the negatives are usually outweighed by the positives.
Debt management program FAQ
We’ve gathered up the most frequently asked questions about debt management programs and brought them together to answer everything you need to know!
Finding the right debt management company
Credit counseling agencies largely provide the same services, but the quality of that service can be very different. We help you choose the right provider for your needs, understanding the similarities in programs offered by different providers.