Guide to Debt Management Plans (DMPs)
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What Is a Debt Management Plan (DMP)?
You’ll meet with a credit counselor to discuss your debts and budget The agency makes arrangements with your creditors to lower interest rates and/or waive late fees You pay an enrollment fee and monthly debt payments to the agency The agency distributes your payments to your creditors
How Does a Debt Management Plan Work?
Pros and Cons of Debt Management Plans
Pros of Debt Management Plans
Credit counselors may work on your behalf May reduce your interest rates May waive your late fees May reduce or stop debt collectors from contacting you May provide an alternative to bankruptcy if you’ve fallen into delinquency May help you become debt-free
Cons of Debt Management Plans
May restrict your access to credit May charge a one-time enrollment fee, and your monthly payment may include service fees up to $75 Any principal you owe is typically not forgiven Some of your debts may not be eligible for the program, such as student loans and secured auto loans Debt collectors may continue to contact you during the first 90 days of your DMP You may lose your program benefits if you fail to make a required payment when due
Choosing a Credit Counseling Agency
Debt consolidation. Credit counselors may advise you about the pros and cons of using a debt consolidation loan. Debt avalanche. Credit counselors may advise you about the pros and cons of using the avalanche method for repaying your debts. This method focuses on paying off the debt with the highest interest rate first. Debt snowball. Credit counselors may advise you about the pros and cons of using the snowball method for repaying your debts. This method focuses on paying off your smallest debts first. Earning interest. Credit counselors may provide you with expert money management advice, including how to earn interest with a high-yield savings account.
Getting Started with a Debt Management Plan
Contact a reputable credit counseling agency and request a free counseling session. Such sessions may be conducted online, via telephone, or face-to-face at a physical office. Authorize the counseling agency to access your credit report if you’re interested in a more personalized session. Credit counselors may run a soft credit check to view your credit report without impacting your credit score. Gather information about your debts and finances. This includes credit card statements, bank account statements, and pay stubs. Participate in a counseling session with a certified credit counselor. This may help you determine whether a debt management program is right for you. Sign up and enroll into a DMP if you agree with the terms and conditions. The agency may charge a DMP service fee as part of your monthly payment until you complete the program.
Sticking to the Plan
Debt Management Comprehensive Guide
How To Get Out of Debt - 6 Steps to Follow What Is a Debt Snowball? The Debt Avalanche Method Explained Top Debt Consolidation Loans A Complete Guide to Credit Counseling 8 Ways to Consolidate Credit Card Debt 6 Ways to Pay off Student Loans Faster How To Refinance Student Loans in 5 Steps
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