Enrolling in a Debt Management Plan
If you are like many Americans who are suffering from high levels of debt and are losing hope, a great option to regain control of your finances is to enroll into a DMP. A DMP is essentially a detailed plan that you set up with your creditors and a Certified Credit Counselor that outlines a realistic and viable debt repayment schedule.
The way it works is that you will voluntarily give a predetermined amount of money based on your income and expenses to your Credit Counseling Agency (CCA). The CCA will then take the money and disperse it according to the DMP you have created, allowing you to alleviate the stress of dealing with the creditors and simultaneously repay your outstanding debts.
Benefits of a DMP
When you elect to enroll in a DMP program, you will see several immediate and long term benefits:
• Creditor calls will be significantly reduced if not completely stopped.
• You will no longer need to deal with figuring out how to disperse your money among your debts since the CCA takes care of it.
• You can repay your debts in as little as 30 months. (on average 30-60 months)
• Depending on your financial situation, your monthly interest rates and penalty fees may be altered or in some cases, waived.
• You can include all your bills and expenses in a DMP.
• After repayment has been completed, the CCA can help you to rebuild your credit.
• You will have taken the first step towards financial independence.
Drawbacks of a DMP
As with everything in life, you will suffer from a few minor drawbacks if you decide to repay your debts through a DMP.
• Depending on your situation, a DMP may or may not negatively affect your creditworthiness. Consult with a credit counselor to find out more.
• Your existing creditors may disclose that fact that you are on a DMP, which is an indicator that you didn’t repay your debts on time, the first time around.
• In most cases, your credit cards will be suspended unless there are extenuating circumstances. In these cases, consult with your CCA for more information.
Enrollment and DMP Repayment Process
Below is the simple step by step process you will need to follow:
1. Go to a CCA and get your financial situation assessed by a professional Credit Counselor.
2. Once you determine eligibility, you will work with the CCA and your creditors to come up with a viable DMP based on your lifestyle, spending habits, debts, and income.
3. When the creditors accept your DMP, you will need to set up an automated payment plan with your CCA that will transfer the monthly amount that was denoted in the DMP.
4. The CCA will disperse the money to all your creditors on schedule so that you never miss a payment or creditor.
5. Each month you will receive a status report outlining payments made to date, amount of debt remaining, and amount of time left on the DMP.
This process will continue till all debts are repaid, however there is one thing to note. Since not all debts are even, the smaller ones will be repaid first, and after these have been paid off, your monthly payment will not decrease. Instead, the CCA will divide any “extra” money among all the remaining creditors to increase the speed at which the debts are paid off.
Although there are some drawbacks to consider, if you have a significant amount of debt then a Debt Management Plan could be the first step toward financially stability. If you are facing mounting debts, contact a Credit Counseling Agency to determine if a DMP is a good solution to help you establish a debt-free life.
