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Can You Make Extra Payments on a Debt Management Program?


After a slight delay to send in some paperwork we were missing, my husband and I finally got our tax refund and I wanted to know if I can use the money to make an extra payment on my debt management program. Are there penalties if I am able to pay my Consolidated Credit accounts early? And is there a specific procedure for making an extra payment or can I just pay a few of my creditors directly?

Elysabethe J. in Charlotte, VT

Making extra payments on a debt management program

It’s fairly common for people enrolled in a debt management program to make extra payments. Whether it’s from a tax refund, a bonus at work, an inheritance or you just decided to sell something to generate some extra cash, you may come into some money that you want to use to get out of debt sooner. Not only is it allowable, but it’s also encouraged as long as you follow the right process that we outline below

There are no penalties for making extra payments on a debt management plan

The good news is that making extra payments on a debt management program is completely penalty and fee-free. You won’t get charged anything or face early repayment fees as you see with some types of loans.

Call customer service if you want to make an extra DMP payment

Consolidated Credit’s client services team is here to help you make sure your program runs smoothly from start to finish. Enrolling in a debt management plan provides a range of benefits as you pay off your debt, including lower APR and no penalty fees from your creditors. The credit counseling team negotiates with your creditors when you first sign up for the program, which is why it’s important to go through proper channels if you have some extra cash.

Making payments to creditors outside of your program could make them think you’re no longer enrolled. In this case, the creditors will generally restore the APR and any fees that were applied to your account prior to enrollment.

The client services team can also help you make sure the extra cash gets applied where it will give you the most benefit. There may be accounts that you’d be better off paying earlier compared to other accounts. You can talk through this with a client services representative to make sure the money gets paid to the right accounts. If there are specific accounts you would like to pay first, just tell the client services rep when you call.

What are the benefits of an extra payment?

Just like when you make an extra payment on a credit card or loan, an extra DMP payment means paying off principal faster. That’s the actual debt you owe, as opposed to accrued monthly interest charges. Even on a DMP, there are usually some interest charges applied each month to your debt, even though your rates are significantly reduced.

When you make an extra payment on any debt outside of the normal required payments, that payment goes wholly to paying off the principal. There are no accrued interest charges to pay. So, you can take a big chunk out of your debt by making extra payments.

Extra payments are beneficial, but always check for penalties!

Although extra payments are great for getting out of debt faster, you should always do what Elysabethe did in this case and ask if there are any penalties. This is especially true for loans. Credit cards never penalize you or apply additional fees for extra payments. However, some loans do come with early repayment or prepayment penalties. Always check with your lender before making an extra payment.

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