A debt management program is a solution to credit card debt offered by nonprofit consumer credit counseling agencies like DebtWave. A debt management program sometimes referred to as a debt management plan or DMP, provides consumers an easy way to pay off debt and reduce financial stress by combining the benefits of a workout arrangement with debt consolidation.
In a workout arrangement, consumers contact their creditors to set up a repayment plan that works with their budget. The creditor typically freezes the account, meaning you can’t continue to use that line of credit while paying off the debt. Individuals who attempt to set up a workout arrangement with their creditors must call each creditor individually and negotiate an arrangement.
Credit counseling agencies that offer DMP’s like DebtWave do the work for you and contact your creditors to set up a single repayment plan to cover all of your credit card debts. The monthly payment is determined by your budget and seeks to have you completely debt-free within three to five years. In some cases, plans may extend beyond five years.
A DMP is also similar to debt consolidation in that a DMP combines multiple debts from multiple creditors into one payment at a reduced interest rate. By significantly reducing interest rates, more of your money goes toward paying off the debt instead of crippling interest fees.
Debt consolidation, however, requires new financing such as a debt consolidation loan. DMP’s are not loans. At DebtWave, we work with creditors on your behalf to reduce your monthly payment, interest rates, and work to waive or reduce any penalties.
Though similar in name, a debt management program is not the same thing as a debt settlement program. With debt settlement, consumers pay a percentage of what is owed to their creditors, but this often results in a negative impact to your credit score. Consumers on a DMP will pay back everything they owe to their creditors, so the credit score impact is usually neutral if not positive.
Enrolling in a DMP can be a positive thing for your credit because it helps consumers with debt improve the two biggest factors used to calculate credit scores: credit history and credit utilization. There is potential to damage your credit score if you don’t continue to make payments while our credit counselors negotiate with your creditors; but as long as you continue to make minimum payments until the program starts, enrolling in a DMP should have a neutral impact on your credits core.
Since DMP’s are typically offered by consumer credit counseling agencies that are 501(c)3 nonprofit organizations, the cost of the DMP is relatively cheaper than other debt solutions like debt settlement. When enrolling in DebtWave’s DMP, clients can expect to pay an initial setup and monthly administration fee. However fees vary by state, so please contact one of our financial counselors to find out how much it costs for you personally to enroll in our DMP.Schedule An Appointment