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Getting out of debt isn’t easy. High interest rates certainly don’t help. That's why we’re very proud, here at MMI, to be able to offer a potential solution to consumers struggling with their debt – a debt management plan. What is a debt management plan, how does it work, and is it right for you? Let’s find out!
A debt management plan or DMP is a method of repaying your outstanding unsecured debt. Unsecured debt means any debt not tied to real property, like a mortgage or a car loan.
A DMP works similarly to a consolidation loan, in that you make a single monthly payment which is then disbursed to the appropriate creditors. A DMP is a not a consolidation loan, however. In fact, it’s not a loan at all. In a consolidation loan, the lender would pay off all of the original creditors, leaving the lender as the sole creditor. In a DMP, the debt still belongs to your original creditors, the payment is simply consolidated and paid through MMI.
The primary benefits of a DMP are reduced interest rates and a faster payoff time. In many cases, accounts paid through a DMP may also see recent late or over-limit fees waived or reduced. Depending on the status of the account, inclusion on a DMP also often puts a stop to any ongoing collection attempts.
Accounts paid through a DMP are paid in full. There are no settlements through a DMP. Paying an account in full – even an account that has gone to collections – is substantially better for your credit history.
Things come up. Plans get thrown off. People find themselves struggling financially. It happens – a lot, actually. Creditors recognize this. By coming to MMI for help you’re showing your creditors that you’re serious about paying off your debt and moving forward with your life. For creditors, it makes sense to help. Simply put, they’d much rather you paid them than didn’t.
Through a DMP you pay back your debts in full, and usually in less than five years. The concessions offered by creditors help you get out of debt and help them recover the money you charged. In the big picture, it’s a win-win.
All creditors are different. Every creditor has a different policy when it comes to debt management benefits.
If you’re struggling with debt, you have a few different options. Some consumers chose to take out a debt consolidation loan. Some opt for debt settlement or bankruptcy. Some just keep making payments as best they can, hoping things will get better.
A DMP would help immediately stabilize your finances and give you a much easier path toward recovery – especially when compared to debt settlement or bankruptcy.
Truthfully though, the only way to really know if a DMP is right for you is to speak with a certified debt and budget counselor. By analyzing your current situation and specific accounts, a counselor would be able to give you a clear picture of what your personal DMP would look like – including monthly payments and how long it would take to become debt free.
Fortunately, speaking with a debt counselor is always free and there’s no obligation to start a DMP. You simply get free expert advice and then decide on your own what you think is the best course of action.
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.