How to Get a Debt Management Plan
If your budget is stretched thin and you have to decide whether to pay one bill or another, it might be time to seek help. Here’s the deal—if you struggle to juggle debt and other financial obligations, you’re not alone. In fact, according to a recent study, one third of Americans are late on at least one bill. Not all of the payments are late due to debt, but regardless of the reasons or circumstances, debt can take a toll on your lifestyle and health.
If you’re ready to change your financial life, a debt management plan (DMP) might be a great solution.
Here’s how to get a debt management plan.
Connect with a credit counselor
The first step is to connect with a certified nonprofit credit counselor. The counselor will help you determine if a debt management plan is right for you, and that process begins with a financial review.
Together with your counselor, you'll review your debt, income, and any other numbers or concerns that are relevant to your financial life. This process is completely confidential, and most of it can be completed online. It might seem scary to share all of these details, but it’s important to be honest so your counselor can create a plan that will work for you and your lifestyle.
Read more: What is a Debt Management Plan?
If it seems like a debt management plan will be a good fit and you’re ready to do the work, then your counselor will create a plan. Even if a DMP isn’t the right solution for you, your credit counselor will help you find an solution.
Don’t forget: it’s always free to connect with a counselor.
Read more: What Does a Credit Counselor Do?
Get honest
Debt management plans require hard work and dedication. Your debt will not disappear overnight. In fact, DMPs usually take between three and five years to complete.
In order to be successful with a debt management, you need to commit to the process and focus on your ultimate goal. If you don’t feel ready to commit, then it’s important to be honest with yourself and your credit counselor.
If you are ready to commit, then it’s time to work with your credit counselor to create a plan.
Call your creditors
Once the plan is created and your lenders have agreed to the creditor concessions—these might include lower interest rates, waived late or overlimit fees, and reasonable monthly payments—you’ll want to call your creditors to change your payment due dates.
When you’re on a debt management plan, you no longer pay each creditor directly. Instead, you pay your credit counseling agency one monthly payment and they pay your creditors on your behalf.
Even though your credit counseling agency has already communicated with your creditors and established a DMP, it’s still important that you speak with your creditors and make sure that the due dates on your individual accounts line up with your new DMP payment date. The goal is to have your credit card payment due 7-10 days after your credit counseling agency payment is due.
This will ensure that there is enough time for you to make your payment to the agency and for the agency to process your payment and then pay the creditors on your behalf.
Follow Through
Once your debt management plan is in full swing, it’s important to follow the rules. Luckily, two of the most important rules are fairly straightforward:
- Make your payments on time
- Don’t miss a payment
If you don’t adhere to the terms of your DMP, then your creditors take away some or all of the benefits they provide for using repaying through a DMP. This might cause your interest rates or monthly payments to increase. The best way to avoid any problems is to follow the rules and uphold your end of the agreement.
Things happen, though. If you find yourself in a financial bind one month, be sure to reach out to your credit counseling agency as soon as possible, so they can help you find the best solution. Remember that nonprofit credit counseling agencies like MMI are here to help you get all the way to the finish line with your financial goals. No matter how things are going, it’s a good idea to keep those lines of communication open.
Bottom line
If you are ready to get started with a debt management plan, the first step is simple: contact a credit counselor and discuss your options. Money Management International has trained counselors available 24/7.
