Frequently Asked Questions about our Debt Management Program
We get it! Not everyone knows what Credit Counseling or a Debt Management Program is. So we get asked a lot of questions about what we do and how it works. We have been providing credit counseling across the nation since 2002. We have compiled all most frequently asked questions over the years and provided the answers to each.
1.What is Credit Counseling?
Credit Counseling is a free service that includes analyzing an individual or family's liabilities, assets, monthly expenses and monthly income, in order to provide guidance and ultimately recommend an action plan to pay off their unsecured debt. One of the debt-payoff strategies we recommend is a debt management program (DMP). Our program typically allows the participant to enjoy reduced interest rates, one low monthly payment, and becoming debt free in fewer than five years.
2. How much does Credit Counseling cost?
No charge. Credit counseling is a free service provided by non-profit organizations like DebtWave Credit Counseling.
3. What do I need to prepare for my credit counseling session?
When you speak with one of our certified credit counselors, it's helpful to know your monthly income and expenses. We will pull your credit report in order to view all of your liabilities. So there's so no need to worry about having statements or other financial documents. We will need to obtain full account numbers from you if you decide to move forward with out Debt Management Program.
4. What is a Debt Management Program?
A Debt Management Program is a credit relief program that typically offers a reduction of interest rates and/or payments. Depending on several factors, your certified credit counselor may recommend you enroll in a debt management program (DMP). The primary purpose of a DMP is to get you out of debt. If you decide to enroll in our DMP, your creditors will likely lower your interest rates allowing much more of your payments to go toward the principal payment instead of interest. To do this, DebtWave will collect one monthly payment from you via ACH to disburse to your creditors in order to pay off your credit card debt. Most individuals on a DMP payoff their credit card debt between three to five years. During that time, you will not be able to use these credit cards. These accounts will be closed.
5. Is there a fee if I enroll in a debt management program?
DebtWave charges a one-time enrollment charge no greater than $99, and a monthly fee no greater than $59. These fees are determined in part by your state of residence and will be calculated by your certified credit counselor during your credit counseling session.
6. How does a debt management program affect my credit score?
Enrolling in a DMP can temporarily lower your credit score, as closing your credit card accounts can increase your debt-to-credit ratio. However, since most people we help are frequently maxed on the cards, the affect is usually minimal. We encourage client to focus on paying on their debt instead of focusing on their credit score. Credit scores are typically used to acquire more debt. We want our clients to refrain from adding debt while paying off their existing debt. A sample of approximately 100+ clients on DebtWave's DMP found the average client saw their FICO score increase 25 points per year once they participated in both our financial literacy and DMP programs.
7. Will a debt management program show up on my credit report?
Some creditors may report that an account is being paid via a debt management program (DMP). However, according to MyFICO.com, that notation should not have any impact on your score.
8. Will you pay off all my creditors when I enroll in the debt management program?
No. This is not a loan. Your balances with each creditor put on the debt management program (DMP) will gradually decrease with each payment you make until they are paid in full.
9. Are you able to negotiate the balance I owe to my creditors?
No. You will ultimately pay back 100 percent of the principal you owe to your creditors. However, with lower interest rates you will have your debt paid off much quicker.
10. Can I leave accounts off of the debt management program?
Yes. But we don't recommend leaving more than one off the program, The purpose of the debt management program (DMP) is to help you get out of debt, which is why we typically recommend all outstanding debts be placed on the DMP. Leaving an account off the plan may tempt you to continue charging on that account and ultimately see your balance go up instead of down. The only accounts we recommend to leave off the DMP are those that are not eligible due to either being new accounts or those opened under a promotional plan.
11. What if I have an emergency while on the DMP?
Most minor emergencies such as car repairs should be included in your monthly budget. Major financial emergencies such as a job loss or large medical expense can be difficult to overcome. We encourage you to set aside the money that you are saving on the debt management program (DMP) and build an emergency fund. If that is still not enough to build a rainy day fund, consider taking on a side-hustle to help build your financial reserves.
12. Can I open a new credit card or line of credit while enrolled in the debt management program?
We highly encourage you to refrain from acquiring any new debt while on the DMP. Most of our clients' goals are to become debt-free. Opening new accounts will likely shatter the dream of achieving this goal.
13. Is a Debt Management Program the same as debt settlement?
No. While debt management and debt settlement programs seem similar on the surface, they are actually very different ways of eradicating debt. While enrolled in a DMP, you'll still be required to make your monthly payments, but will do so at a reduced interest rate. You eventually pay back 100 percent of your total debt plus interest. A debt settlement company, on the other hand, will negotiate with your creditors to settle for 40 to 60 percent of your outstanding debt. In order for your creditors to agree to a lower balance, you must fall severely delinquent. When paying the debt settlement company each month, instead of paying your creditors right away, they are helping you build reserves to ultimately make an offer to your creditors after months or sometimes years of starving them of payment. Most people current with their debt payments are not comfortable intentionally falling this far behind with their payments. The fees paid to debt settlement companies are typically much higher than debt management. For example, if you owed $100,000 to your creditors, a debt settlement company may negotiate your outstanding debt to $40,000. However, you'll also have to pay fees of 15 percent or more of the total debt you owe. So at a minimum, you would end up paying $55,000 ($40,000 + $15,000) to settle your debt. The impact of your credit score with a debt settlement program will be much greater as your payment history will be severely damaged. You'll also have some tax implications to consider. The debt that was forgiven must be claimed on your taxes as income. So in the case of our example, you would have to add $60,000 to your earning for the year because that was the amount of debt that was forgiven by your creditors. If you choose to use a debt settlement company to handle your debt, it's also important to note that you may be susceptible to lawsuits and your wages may be garnished.
14. Can you help with Student Loans?
Student loans are not eligible for our debt management program. However, we can provide you with some tools to assist you with paying your student loans back.
15. Why can't I receive the benefits of the debt management program on my own?
Creditors are willing to give our clients benefits they don't typically offer to individuals mostly because they know our clients will receive a financial education and budgeting guidance to help them become debt-free. Sometimes creditors will offer a reduction in interest or payment directly to an individual, but unlike a DMP, it will typically be offered for a limited amount of time.
16. Do I have to be delinquent prior to joining a debt management program?
No. Most creditors typically require that clients must be current with their payments in order to be eligible for a DMP. Creditors typically apply benefits only for those accounts that are current or no more than two to three months behind. If an account is severely delinquent, it will not be eligible for the DMP.
17. Can I do everything online?
We recognize that in a digital world it is sometimes more convenient to access information online. Our certified credit counselors and customer service representatives can predominantly communicate with you via email. However, for the initial credit counseling session, it's crucial that we discuss your financial situation over the phone.
18. What type of debt can I enroll in the debt management program?
We specialize in helping clients acquire benefits to pay off their credit cards, department store-branded credit cards, and some unsecured personal loans. Collections and medical bills are not eligible for our program. If you have a payday loan, car loan, home loan, and/or student loan, we can refer you to an organization that can assist you. These debts cannot be added to the DMP.
19. Is a debt management program similar to bankruptcy?
No. There are significant differences between a debt management program and filing for bankruptcy. Unlike a bankruptcy, your debts are not forgiven if you enroll in a DMP. A DMP will also have little to no impact, at least long-term, on your credit score. A bankruptcy, on the other hand, will dramatically lower your score. A bankruptcy will also stay on your credit report for seven to 10 years. On a DMP, you'll be paying back your debt over a period of time that usually lasts between three and five years. A Chapter 7 bankruptcy, which forgives debt without a payment plan, usually lasts four to six months. A Chapter 13 bankruptcy, which is a payment plan, will also last three to five years. A DMP will only cost you the outstanding debts you have, likely at a lower interest rate, along with a nominal service fee. Filing for bankruptcy can be costly. You may eliminate outstanding debts, but you'll incur court and attorney fees.
20. Can I pay my debt off early?
Yes! There is no penalty or fees if you pay off your debt earlier than anticipated. Just make sure all payments are made out to DebtWave in order to successfully complete the debt management program. Additionally, if you choose to pay off your debt early, we recommend having at least three to six months worth of your monthly expenses saved up first, should you experience any emergency.
21. Can I increase my debt management program (DMP) payments?
Yes! We recommend paying off your debt as soon as possible. We encourage our clients to pay as much as they can while they are on the DMP. Paying more than the monthly payment will save you time and money. If you are interested in increasing your DMP payments just once or moving forward, please contact your customer service representative.
22. Will I have to close my credit card accounts if I enroll in the debt management program?
Yes. In order to be eligible for the debt management program (DMP), as well as achieve your goal of becoming debt-free, your creditors will close your accounts. You will not be able to use those credit cards again which prevents you from creating more debt.
23. What if I can no longer afford my payment on the debt management program?
If you are currently enrolled in DebtWave's debt management program (DMP) and are no longer able to afford your monthly payments, the first step is to contact your customer service team member. Our team of professionals will work to assist you as much as possible during this hardship. We will work with your creditors to try and further reduce your monthly payments. In some instances, your customer service representative may try to connect with you a financial expert that may offer a different solution.
24. Can I add more debt to my existing debt management program?
Absolutely! In fact, we encourage you to add as much debt as possible so that when you graduate from our debt management program (DMP), you will truly be debt-free. The more debt we assist you with, the more you'll save, and the earlier you'll be able to enjoy your debt-free life!
Accordions
Credit Counseling is a free service that includes analyzing an individual or family’s, liabilities, assets, monthly expenses and monthly income, in order to provide guidance and ultimately recommend an action plan to pay off their unsecured debt.
One of the debt-payoff strategies we recommend is a debt management program (DMP). Our program typically allows the participant to enjoy reduced interest rates, one low monthly payment, and becoming debt free in fewer than five years.
No charge. Credit counseling is a free service provided by non-profit organizations like DebtWave Credit Counseling.
When you speak with one of our certified credit counselors, it’s helpful to have a rough estimate of your monthly income and expenses. We will pull your credit report in order to view all of your liabilities so no need to worry about having statements or other financial documents.
A Debt Management Program is a credit relief program that typically offers a reduction of interest rates and/or payments. Depending on your ability to pay off your credit card debt, your certified credit counselor may recommend you enroll in a debt management program (DMP). The primary purpose of a DMP is to get you out of debt.
If you decide to enroll in our DMP, your creditors will likely lower your interest rates allowing much more of your payments to go toward the principal payment instead of interest. To do this, DebtWave Credit Counseling, Inc. will collect one monthly payment from you to disburse to your creditors in order to pay off your credit card debt.
Most individuals on a DMP payoff their credit card debt between three to five years. During that time, you will not be able to use your credit cards. These accounts will be closed.
DebtWave Credit Counseling, Inc. charges a one-time enrollment charge no greater than $99, and a monthly fee no greater than $59. These fees are determined in part by your state of residence and will be calculated by your certified credit counselor during your credit counseling session.
Enrolling in a DMP can temporarily lower your credit score, as closing your credit card accounts can increase your debt-to-credit ratio. However, since most people we help are frequently maxed on the cards, the affect is usually minimal. We encourage client to focus on paying on their debt instead of focusing on their credit score. Credit scores are typically used to acquire more debt. We want our clients to refrain from adding debt while paying off their existing debt.
A sample of approximately 100+ clients on DebtWave’s DMP found the average client saw their FICO score increase 25 points per year once they participated in both our financial literacy and DMP programs.
Some creditors may report that an account is being paid via a debt management program (DMP). However, according to MyFICO.com that notation should not have any impact on your score.
No. This is not a loan. Your balances with each creditor put on the debt management program (DMP) will gradually decrease with each payment you make until they are paid in full.
No. You will ultimately pay back 100 percent of the principal you owe to your creditors. However, with lower interest rates you will have your debt paid off much quicker.
Yes. But we don't recommend leaving more than one off the program, The purpose of the debt management program (DMP) is to help you get out of debt, which is why we typically recommend all outstanding debts be placed on the DMP. Leaving an account off the plan may tempt you to continue charging on that account and ultimately see your balance go up instead of down.
The only accounts we recommend to leave off the DMP are those that are not eligible due to either being new accounts or those opened under a promotional plan.
Most minor emergencies such as car repairs should be included in your monthly budget. Major financial emergencies such as a job loss or large medical expense can be difficult to overcome. We encourage you to set aside the money that you are saving on the debt management program (DMP) and build an emergency fund. If that is still not enough to build a rainy day fund, consider taking on a side-hustle to help build your financial reserves.
We highly encourage you to refrain from acquiring any new debt while on the DMP. Most of our clients’ goals are to become debt-free. Opening new accounts will likely shatter the dream of achieving this goal.
No. While debt management and debt settlement programs seem similar on the surface, they are actually very different ways of eradicating debt.
While enrolled in a DMP, you’ll still be required to make your monthly payments, but will do so at a reduced interest rate. You eventually pay back 100 percent of your total debt plus interest.
A debt settlement company, on the other hand, will negotiate with your creditors to settle for 40 to 60 percent of your outstanding debt. In order for your creditors to agree to a lower balance, you must fall severely delinquent. When paying the debt settlement company each month, instead of paying your creditors right away, they are helping you build reserves to ultimately make an offer to your creditors after months or sometimes years of starving them of payment. Most people current with their debt payments are not comfortable intentionally falling this far behind with their payments.
The fees paid to debt settlement companies are typically much higher than debt management. For example, if you owed $100,000 to your creditors, a debt settlement company may negotiate your outstanding debt to $40,000. However, you’ll also have to pay fees of 15 percent or more of the total debt you owe. So at a minimum, you’d end up paying $55,000 ($40,000 + $15,000) to settle your debt.
The impact of your credit score with a debt settlement program will be much greater as your payment history will be severely damaged. You’ll also have some tax implications to consider. The debt that was forgiven must be claimed on your taxes as income. So in the case of our example, you’d have to add $60,000 to your earning for the year because that was the amount of debt that was forgiven by your creditors.
If you choose to use a debt settlement company to handle your debt, it’s also important to note that you may be susceptible to lawsuits and your wages may be garnished.
Student loans are not eligible for our debt management program. However, we can provide you with some tools to assist you with paying your student loans back.
Creditors are willing to give our clients benefits they don’t typically offer to individuals mostly because they know our clients will receive a financial education and budgeting guidance to help them become debt-free.
Sometimes creditors will offer a reduction in interest or payment directly to an individual, but unlike a DMP, it will typically be offered for a limited amount of time.
No. Most creditors typically require that clients must be current with their payments in order to be eligible for a DMP. Creditors typically apply benefits only for those accounts that are current or no more than two to three months behind.
If an account is severely delinquent, it will not be eligible for the DMP.
We recognize that in a digital world it is sometimes more convenient to access information online. Our certified credit counselors and customer service representatives can predominantly communicate with you via email. However, for the initial credit counseling session, it’s crucial that we discuss your financial situation over the phone.
We specialize in helping clients acquire benefits to pay off their credit cards, department store-branded credit cards, and some unsecured personal loans. Collections and medical bills are not eligible for our program.
If you have a payday loan, car loan, home loan, and/or student loan, we can refer you to an organization that can assist you. These debts cannot be added to the DMP.
No. There are significant differences between a debt management program and filing for bankruptcy.
Unlike a bankruptcy, your debts are not forgiven if you enroll in a DMP. A DMP will also have little to no impact, at least long-term, on your credit score. A bankruptcy, on the other hand, will dramatically lower your score. A bankruptcy will also stay on your credit report for seven to 10 years.
On a DMP, you’ll be paying back your debt over a period of time that usually lasts between three and five years. A Chapter 7 bankruptcy, which forgives debt without a payment plan, usually lasts four to six months. A Chapter 13 bankruptcy, which is a payment plan, will also last three to five years.
A DMP will only cost you the outstanding debts you have, likely at a lower interest rate, along with a nominal service fee. Filing for bankruptcy can be costly. You may eliminate outstanding debts, but you’ll incur court and attorney fees.
Yes! There is no penalty or fees if you pay off your debt earlier than anticipated. Just make sure all payments are made out to ‘DebtWave Credit Counseling, Inc.’ in order to successfully complete the debt management program. Additionally, if you choose to pay off your debt early, we recommend having at least three to six months worth of your monthly income saved up first, should you experience any emergency expense.
Yes! We recommend paying off your debt as soon as possible. We encourage our clients to pay as much as they can while they are on the DMP. Paying more than the monthly payment will save you time and money. If you are interested in increasing your DMP payments just once or moving forward, please contact your customer service representative.
Yes. In order to be eligible for the debt management program (DMP), as well as achieve your goal of becoming debt-free, your creditors will close your accounts. You will not be able to use those credit cards again which prevents you from creating more debt.
If you are currently enrolled in DebtWave’s debt management program (DMP) and are no longer able to afford your monthly payments, the first step is to contact your customer service team member. Our team of professionals will work to assist you as much as possible during this hardship. We will work with your creditors to try and further reduce your monthly payments. In some instances, your customer service representative may try to connect with you a financial expert that may offer a different solution.
Absolutely! In fact, we encourage you to add as much debt as possible so that when you graduate from our debt management program (DMP), you will truly be debt-free. The more debt we assist you with, the more you’ll save, and the earlier you’ll be able to enjoy your debt-free life!