Thursday, October 21, 2010, AM | 1 Comment
If you have multiple unsecured debts like credit card debts, personal loans, store cards, etc, and you are having problems in managing all of these, you can take help of a Debt Management Plan (DMP). Debt management plan helps you in paying off your debts and reestablish good credit.
What is DMP?
A debt management plan is a hardship program that provides relief from debt. A DMP is generally for those who need significant help.
Debt Management Plan is offered by credit counseling agencies to help you to repay all your debts, over a certain period of time. A trained counselor will help you make a financial plan for you. In a debt management plan, you will have to make a single payment to the agency, and the agency will forward the money toward your creditors. This will be done on the basis of a voluntary negotiation between you and your creditors.
You can go for DMP when you are unable to manage too many bills, when interest rates are high and you are worried that you may miss payments. It generally takes 1.5-5 years to pay off your debts through a DMP.
Benefits of DMP
The benefits of a debt management plan are:
Keeps you stress free
In a debt management plan, all the negotiations are done by the counselor. As you don’t have to deal with your creditors any more, you can remain stress free.
It offers you flexible payment options and you can also change your payment option according to the changes in your circumstances.
In a DMP you have to make a single payment each month. You are required to make this payment to the counseling agency. Thus, it becomes more convenient to you than making the payments to your multiple creditors.
Your credit counselor may negotiate with your creditors to reduce your interest rate, so you will have to make a lower monthly payment.
No harassing call
Once you enroll in this plan, all harassing calls from your creditors will come to an end.
In a Nutshell
A Debt Management Plan gets listed on your credit report. However, according to Fair Isaac Corporation (FICO), your DMP is not considered during the calculation of your FICO score. Thus, DMP does not hurt your score as such. However, before going to a counseling agency to enroll in DMP, check with the authenticity of the company.
This article was written by Emily Jones, a guest writer.