Lower bills and pay off debt from a Debt Management Plan (DMP)

What exactly is debt management plan (DMP) and how can it help?
They are offered from a credit counseling agency or debt management company, and a DMP involves the company negotiating with your creditors in an attempt to lower the interest rates and payments on your debts and bills.

What type of debt and bills are included in a debt management plan?
Most types of unsecured debts, such as credit card debt, medical bills, payday loans, and student loans are included in a debt management plan.

How can I benefit from DMP?
The benefits of a debt management plan include:

• Lower monthly debt payments and lower interest rates.
• Many fees and charges, such as late fees and over limit fees, are waived off.
• It will stop any harassing phone calls from your creditors and debt collectors.
• You will be required to make only a single monthly payment to pay all your bills.

When should I use a Debt Management Plan?

• If you have multiple bills and debts, such as medical, credit card, student loans, and if you cannot manage them efficiently.
• You are experiencing a financial crisis or emergency and wish to get rid of your debts.
• It can stop collection calls.
• You need to lower the interest rate on your bills and debts.
• An alternative to a debt management plan is a credit counseling agency.

What happens in a DMP?

• A credit counseling agency or a debt management company will need to closely review your financial situation. This review will take into account the interest rates you pay on your debts and bills, the required minimum payment, and your total debt amount.
• You will then need to enroll. At that point the company will work on your behalf and negotiate with your creditors in an attempt to lower the monthly payments and interest rates.
• The credit counseling agency or debt management company will then work out a repayment plan with your creditors. They will agree to an amount that will allow you to pay back the outstanding balance.
• After this is successful, you will make a single monthly payment to the credit counseling agency or debt management company. This company will then disburse the payment to your creditors until all bills and debts have been eliminated.

What do I need to do to make this successful?

• Be sure to agree to a plan only if you can afford to make the monthly payments. In other words, if the debt management company or credit counseling agency can’t negotiate for a repayment plan you can afford to pay month in and out, then it is better not to avail its services.
• You need to get everything in writing. Get the terms and conditions in writing. Also verify the monthly fees, the length of the program, and read all documents before you sign the agreement.
• Get the DMP approved by your creditors. It is safe to ask your creditors so that before you sign on a DMP, make sure the creditors approved it.
• Make regular payments once the plan is effective. Don’t miss any payments.
• Be aware of fees from the debt management company or credit counseling agency. Find out about all charges and fees charged by the company for their services.  Make sure you are still paying less money, even after their fees, and that you are not paying higher fees.
• Verify your payments. Make sure the company doesn't send late payments to your creditors and verify payments are made and received.
• Find additional pros, cons, and an FAQ on debt management. More.

Does debt management program affect your credit?

No. When you are using a debt management plan to pay debts and bills, your credit report will indicate that you are making payments through a credit counseling agency or a debt management help company. However, the credit reporting agencies will not lower a credit score from these plans.

The bottom line is that a debt management program will help you recover from debt problems that are the result of credit card debt, medical expenses, loans, and more. You just need to keep making payments until you are debt free.

How do I get started?

The easiest and most effective way to start a debt management plan is to contact a credit counselor. Read more. Counselors will guide you through the process, negotiate with your creditors, and they will provide you with the best chance to be successful.