Create Your Own DIY DMP
A debt management plan, or DMP, is a structured repayment plan designed to pay off your unsecured debt within a certain period of time.
Here at MMI, our credit counselors assess your current financial situation and might suggest a DMP if such a program is deemed beneficial to you. There are a lot of reasons why you would want to consider enrolling in a DMP through a certified credit counseling agency, such as MMI, but if you’re inclined to make a go of it on your own first, here are the steps you’ll need to take.
Contact your creditors
One of the major keys to a successful DMP is getting your creditors onboard – which means getting them to reduce your interest rates and agree to a structured monthly payment. Some creditors have internal hardship programs that include a standard interest rate and a set monthly payment. These programs may be for the life of the debt (until paid off) or for a set period of time (usually 6 to 12 months) after which the rates will return to normal. Every creditor has different policies, so the only way to find out what they offer is to give them a call.
Set up automated payments
Many creditors will require that you agree to automated payments as a condition of enrollment. Even if it isn’t required, it can be a great help for a lot of reasons. Most importantly it helps prevent late or missed payments. In many cases a missed payment can cause you to default out of your creditor’s internal program, and they often won’t allow you to re-enroll. Also, sometimes enrollment on a DMP can cause a disruption to your monthly statements.
Don’t open any new credit
Some creditors will require that you not take on any new unsecured debt while the terms of your agreement are in effect. They’re serious about that, so don’t do it.
Monitor your accounts
If everything’s gone well, your balances should be going down steadily. Errors do happen, however, so make sure you’re checking your statements each month, paying close attention to your balance, payments made and monthly interest rate.
Stick to your budget
One of the incentives for creditors to offer you these reductions is that the debt must be paid in full within a set period of time (usually less than five years). This is good, because it means your debt is paid off quickly, but it does mean that your monthly payments may end up being higher than your regular minimum payments. In order to navigate those payments and remain in good standing, you’ll need a workable budget and a lot of willpower.
If a debt management plan sounds like it might benefit you, but you’re not interested in the do-it-yourself version, or you’re simply unsure what you should do consider speaking to one of our certified credit counselors. Remember, no matter how you choose to deal with it, if your debt is weighing you down the most important thing you can do is decide to make a change.
Go further with our Ultimate Guide to Creating a DIY Debt Repayment Plan