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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.
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.
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.
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.
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.
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.
The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.
Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.
The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.
The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.
The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.