What is the Success Rate of a Debt Management Plan?

What is the Success Rate of a Debt Management Plan?

Debt Management Plans seem like a practical way to pay off your credit card debt. After all, who doesn’t want lower interest rates? Wouldn’t we all love to have lower payments as well? But what is the success rate of clients completing the plan?

 

DebtWave Credit Counseling analyzed data on clients that enrolled on their program during a five-year period from 2016 to 2020. Results showed that 68.4% percent successfully completed their debt management plan. During that period, 14,670 people enrolled and 10,038 of them have since paid their debt in full.

DMP success rate
Success Rate

“It’s great to see such a high success rate for our clients paying off their debt on our program”, said Michael Marsden, Director of Operations. “A lot of clients that seek our help are struggling immensely with credit card debt and other bills. They’re living paycheck to paycheck. It’s quite an accomplishment for them to overcome their financial challenges and become debt free.”

According to data from the American Fair Credit Council (AFCC), DebtWave's success rate is nearly triple what Debt Settlement companies see. AFCC reported that only 23% of debt settlement clients have all of their settled while on their program.

Debt Management Program Cancellation Reasons

Not all clients found success as 4,123 clients (28.1%) cancelled their plan. The most common reason for termination was “stopped making payments”. Some of these clients filed bankruptcy, signed up for debt settlement or could no longer afford payments altogether. A small percentage decided to go back to paying it on their own at the higher interest rates.

“Most of our clients come to us without an emergency fund,” Marsden added. “We help them with their budgeting, encouraging them to start saving. But financial hardships like loss of income or medical expenses are too much for them to overcome.”

Debt Management Program Success Rates

The remaining 509 clients (3.5%) are still actively paying off their debt. Most of the active clients are on their final year of their program. Although the typical Debt Management Program concludes in less than 5 years, clients can extend their plan by adding more accounts. New debts can be added at any time which will increase the total time on the program.