What is a Debt Management Plan (DMP)
A debt management plan is a formal agreement between a debtor and creditor(s). Debt Management Plans (DMP) help reduce outstanding, unsecured debts at a reduced level over a fixed period of time to help regain control of finances.
Debt Management Plans are individually tailored based on what can be realistically afforded on a monthly basis. To achieve an accurate figure, an income and expenditure test will establish what monies are coming into the household and what is being paid out. Income and expenditure includes everything, such as rent/mortgage, secured loans, utility bills, and essential living expenses. Once the income and expenditure is completed, the leftover amount is your disposable income which is divided amongst creditors through Free My Debt.
Features:
A Debt Management Plan works by enabling us to take one affordable monthly payment from you. It's affordable because we calculate it against guidelines that ensure you have what you need to live (things like your housing costs, children's and pets' needs, etc are all taken into account: These guidelines have been agreed with creditors and are usually accepted). We then distribute this to all your creditors proportionately based on what they are owed - this means everyone gets their fair share. Within these payments we do deduct our initial and, thereafter, monthly fee. By letting us help you this way, you can pay off your debt with the comfort that although finances may tight for some time to come, you will be able to make headway and work towards a debt free future with a clear mind and head held high.
Debt Management Plans are individually tailored based on what can be realistically afforded on a monthly basis. To achieve an accurate figure, an income and expenditure test will establish what monies are coming into the household and what is being paid out. Income and expenditure includes everything, such as rent/mortgage, secured loans, utility bills, and essential living expenses. Once the income and expenditure is completed, the leftover amount is your disposable income which is divided amongst creditors through Free My Debt.
Features:
- Reduce your monthly repayment
- We handle negotiations with all creditors (please include ALL creditors)
- You must be able to afford a %100 payment each month (however in some exceptional cases we may be able to reduce this to %80 per month)
A Debt Management Plan works by enabling us to take one affordable monthly payment from you. It's affordable because we calculate it against guidelines that ensure you have what you need to live (things like your housing costs, children's and pets' needs, etc are all taken into account: These guidelines have been agreed with creditors and are usually accepted). We then distribute this to all your creditors proportionately based on what they are owed - this means everyone gets their fair share. Within these payments we do deduct our initial and, thereafter, monthly fee. By letting us help you this way, you can pay off your debt with the comfort that although finances may tight for some time to come, you will be able to make headway and work towards a debt free future with a clear mind and head held high.
How does a DMP work?
How Does a Debt Management Program Work? When you enter into a debt management program, you are essentially admitting that you are in over your head financially. A debt management program does several things to help you cope with your financial situation.
First, many debt management companies will require you to agree not to open any new credit cards or accounts. Many debt management programs also involving financial literacy lessons, which cover issues such as budgeting, calculating interest rates, and other important financial lessons. The purpose of these programs as part of your debt management program is to help you stay out of debt and learn to manage money more wisely so you do not have continued debt problems.
While financial education, the main purpose of a debt management program is to help you get existing debt under control. Depending on your situation, there are a number of things a debt management program does to help you cope with your debt:
Why Enter a Debt Management Program? Entering a debt management program can have several advantages.
First, many debt management companies will require you to agree not to open any new credit cards or accounts. Many debt management programs also involving financial literacy lessons, which cover issues such as budgeting, calculating interest rates, and other important financial lessons. The purpose of these programs as part of your debt management program is to help you stay out of debt and learn to manage money more wisely so you do not have continued debt problems.
While financial education, the main purpose of a debt management program is to help you get existing debt under control. Depending on your situation, there are a number of things a debt management program does to help you cope with your debt:
- A debt management program may involve speaking with creditors to lower interest rates or to remove over-the-limit and late fees.
- A debt management program may involve helping you to consolidate your debts. This involves taking a new loan to pay off your existing creditors so you now only owe one lender.
- A debt management program may involve negotiating with your creditors to enter into a special payment plan or to pay less then what you owe. Often, this is facilitated though a payment plan arrangement with the debt settlement company in which you send your payments to them and they send the payments on to the creditors.
Why Enter a Debt Management Program? Entering a debt management program can have several advantages.
- Experienced credit counselors may have a relationship with credit card companies and may better understand how to negotiate with them. If a debt management program is able to arrange a consolidation loan or help you lower your interest rates or settle your debt, the savings could be substantial.
- A debt management program can provide relief from collection calls, as your creditors may agree to a payment plan or your credit counselor may be able to speak to them on your behalf.
- Entering into a payment plan with a debt management company may give you the incentive and discipline you need to get your financial life under control.
Does a Debt Management Program Hurt Your Credit?
The affect of a debt management program on your credit score depends upon the specific actions the program involves. Simply joining a debt management program has no impact on your credit score. Negotiating lower rates with creditors also typically has no affect on your credit score. However, if your debt management plan withholds payments to creditors as a negotiating tactic or helps you settle your debt for less, this can cause your credit score to drop dramatically.
How will a DMP help with my financial issues?
A debt management plan or program (often abbreviated DMP) allows you to consolidate your unsecured credit card debts into one monthly payment that’s more manageable for your monthly finances. However depending on your situation, a DMP may not be your only option when it comes to finding relief from debt. So how do you know if a debt management plan is the best option and when does it make sense for your finances?
While you have a number of options if you’re looking at debt consolidation, a debt management plan offers several advantages all its own. The first advantage is that you don’t need a strong credit rating to qualify for the program. With some debt consolidation solutions you need a good credit score to make them viable debt relief options, such as a personal debt consolidation loan where you need to qualify for a good interest rate to actually see a benefit. A debt management plan is a viable option for relief even if you have bad credit.
Another advantage is that once you’re enrolled in a DMP, the credit counseling agency may be able to stop any further credit rating decline on your credit from late or missed credit card debt payments. Some clients have even seen an improvement in their credit scores upon successfully completing the program. The big advantage, of course, is a debt management plan helps you avoid the harsh penalties of debt settlement or bankruptcy that can stay on your credit report up to 7 years.
In addition to helping you avoid financial disaster though, the best benefit of a debt management plan is how much money it can help you save on your debt. With an interest rate that’s so much lower on all your debts you pay much less in total interest payments. You pay less in interest, even though you still pay your debts back in-full. You also get completely debt-free in a fraction of the time.
While you have a number of options if you’re looking at debt consolidation, a debt management plan offers several advantages all its own. The first advantage is that you don’t need a strong credit rating to qualify for the program. With some debt consolidation solutions you need a good credit score to make them viable debt relief options, such as a personal debt consolidation loan where you need to qualify for a good interest rate to actually see a benefit. A debt management plan is a viable option for relief even if you have bad credit.
Another advantage is that once you’re enrolled in a DMP, the credit counseling agency may be able to stop any further credit rating decline on your credit from late or missed credit card debt payments. Some clients have even seen an improvement in their credit scores upon successfully completing the program. The big advantage, of course, is a debt management plan helps you avoid the harsh penalties of debt settlement or bankruptcy that can stay on your credit report up to 7 years.
In addition to helping you avoid financial disaster though, the best benefit of a debt management plan is how much money it can help you save on your debt. With an interest rate that’s so much lower on all your debts you pay much less in total interest payments. You pay less in interest, even though you still pay your debts back in-full. You also get completely debt-free in a fraction of the time.