Debt Management Plans
A Debt Management Plan (commonly referred to as a DMP) can be a solution for people who are heavily in debt. Typically, people who use a Debt Management Plan to eliminate their debt load typically have debts such as credit card debt, personal loan repayments, and bank over drafts, known as unsecured debts. This is opposite of secured debts such as mortgages, car loans, rent and other priority costs that don’t qualify for monthly payment reductions. According to the National Foundation for Credit Counseling,
“A DMP is a systematic way to pay down your outstanding debt through monthly deposits to your credit counseling agency, which will then distribute these funds to your creditors. By participating in this program, you may benefit from reduced or waived finance charges and fewer collection calls. And when you have completed your payments, they’ll help you reestablish credit.”
It can take up to 3-5 years for your debts to be repaid when using a Debt Management Program. Debt Management Programs can be found at non-profit organizations as well as with fee-charging companies. Whether the terms of a Debt Management Plan are accepted and approved are entirely up to the creditor who is owed money. Because of this, credit counselors and debt management organizations will typically suggest a program that is most likely to work for the person in debt, so the chances of failure are as low as possible.
For people who have serious debt and credit problems, entering into a Debt Management Program with a certified credit counseling agency can make a huge difference. Just keep in mind, it’s important to work with a credit/debt counselor who is there to help you and work with you.