Get help from and pay off debts from a Debt Management Plan (DMP).
Anyone who is struggling to pay their bills or behind on them can seek help from a Debt Management Plan, sometimes called a DMP. These are available from many sources listed below, ranging from credit card companies to lenders such as payday loan providers. Also, many non-profit credit counseling agencies are also involved in signing up clients to debt management plans, often free of charge to them. A DMP is one solution to paying off credit card or medical debts, loans, and other financial obligations.
What exactly is a debt management plan (DMP) and how can it help?
They are offered from a credit counseling agency, a private or non-profit debt management company, or directly from a credit card issuer or bank. A DMP involves the company that is offering the service to negotiate with creditors on the consumers behalf. It will often involve a highly trained counselor talking to a creditor. They do this in an attempt to lower the interest rates and/or monthly payments on your unpaid debts and bills. They will also try to waive fees if applicable.
What type of bills are included in a debt management plan?
Most types of unsecured debts, such as credit card, medical bills, payday loans, and student loans are included in a debt management plan. If there are any other obligations a family has, those should be reviewed as well to see if they are relevant. When entering into this arrangement, also try to include all outstanding obligations that you have. Always be sure to get the specifies on your plan and what bills are covered.
How can I benefit from DMP?
There are many benefits of a debt management plan. They include some or all of the following.They can lower a consumers monthly debt payments and reduce their interest rates.
- Many fees and charges, such as late fees and over limit costs, are waived off.
- Once the process has started, it will stop any harassing phone calls from your creditors, lenders and debt collectors.
- You will be required to make only a single monthly payment to pay all your bills.
Get help from credit card issuers debt management plans (DMP).
Most credit card companies offer this form of assistance to their customers. The banks, lenders, and companies include American Express, Bank of America, Chase Card Services, Capital One, Citibank, Discover Financial Services, HSBC Card Services, GE Money, U.S. Bank and last, but not least, Wells Fargo Card Services.
The National Foundation for Credit Counseling has reported that for over 40 years, millions of consumers have benefited from repayment programs and avoided bankruptcy by using debt management plans (DMPs). Numerous lenders and creditors provided help in the form of some repayment concessions, including waiving over-the-limit fees, late fee, and also providing a reduction in interest rates. The main DMP from national banks are as follows.
There are also independent organizations, non-profits groups, charities, and others that offer debt management plans. They can contact your lender directly on your behalf to try to get you relief. Or they can offer you advice and other aid, such as access to budgeting skills and workshops. An example of one of these organizations is Consumer Credit Counseling Services, which are part of the National Foundation for Credit Counseling (NFCC), Inc.
The DMP plans will help borrowers erase their debt, and it will also encourage them to set aside funds and savings for a financial safety net for any future emergencies. How can this occur? In the past, debt management plans made consumers pay every spare dollar to paying off bills. These new plans, with lower obligations and repayment rates, will allowing people to build some emergency savings and funds that will prevent them from falling back into debt easily in the future. You still may be able to negotiate down principal though. Find tips to negotiate credit card debt.
When should I use a debt management plan?
While each consumer has their own, unique financial situation that they need to deal with, there are some common themes as to when someone should use a debt management plan. But each situation is unique, and anyone that is interested in proceeding should discuss this closely with a counselor. These plans are just one solution you should explore though, and they are not means to an end.
- If you have multiple bills and debts that are owed, 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 during this window of time.
- It can stop collection calls.
- You need to lower the interest rate on your bills and debts.
- If a consumer does not think a DMP is the best option for them, than an alternative to a debt management plan is debt help services from 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. The client needs to provide them with documentation on all of your accounts and financial obligations. This review will take into account the interest rates you pay on your debts and other bills, the required minimum payment, and your total debt amounts that are unpaid.
You will then need to enroll. At that point the company will work on your behalf during he length of the agreement in place. A specialist will negotiate with your creditors in an attempt to lower the monthly payments and interest rates.
The credit counseling agency or provider you select will then work out a repayment plan with your creditors. They will agree to an amount that needs to be paid each month on all of the debts, but it 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. It is usually due at the end of the month, but the dates can vary for each client. This company will then disburse the payment to your creditors until all 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 even use their 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. Be sure that any fees are discussed and the terms are put into any 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. Don’t just relay on what your are told by a company or credit agency. Call the creditors directly to verify.
Make regular payments once the plan is effective. This is absolutely critical to ensure that all of the household's debts are paid down over time. Don’t miss any payments. Even being late on or missing just one payment can cancel the deal and put the consumer back to square one.
Be aware of fees or costs from the debt management company or credit counseling agency. As noted, this should be done in writing. 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, then you would if you didn’t not use their services. Also compare costs between companies to ensure that you are not paying higher fees that what the rest of the industry has in place.
Verify your payments. Make sure the company you are working with doesn't send late payments to your creditors. It is also generally wise for the client to verify that all payments are made and received each month.
Find additional pros, cons, and an FAQ on debt management. This will help you determine whether this option is the best one for you.. Another resource that is fully supported by the National Foundation for Credit Counseling and many credit card companies are hardship plans. These have some of the same traits as a DMP. Look into any credit card hardship programs that your credit card company may offer. More on credit card hardship programs.
Does a debt management program affect your credit?
No. When you are using a debt management plan, your credit report will indicate that you are making payments through a credit counseling agency or some other provider. While this will be noted on your report, 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 problems that are the result of credit card debt, medical expenses, loans, and more. You just need to keep making payments and stay on track with the plan. While it doesn’t happen overnight, eventually individuals will be debt free from these programs and their credit scores will be improved.
How do I get started?
The easiest and most effective way to start a debt management plan is to contact a credit counselor. There are locations in each and every state, and many of the services are free. Find how to contact a free credit counselor near you. Among other things, they can show you how to start a debt management plan. Counselors will guide you through the process, negotiate with your creditors, and they will provide you with the best chance to be successful.