How to Make a Debt Management Program Work for You
Choose a Debt Management Program carefully., Make sure you can make the negotiated monthly payment., Get the DMP plan in writing., Make your regular payments to creditors until they have accepted the DMP proposal., Make sure your creditors have...
Step-by-Step Guide
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Step 1: Choose a Debt Management Program carefully.
The credit counseling and debt management industry is, unfortunately, infested with companies that are all too willing to take advantage of people who are already in money trouble.
Choose the wrong program, and you could quickly end up in worse shape than before.
Seek real credit counseling before enrolling in a DMP, and carefully consider other options, such as negotiating with creditors yourself.
If you do decide that a DMP is right for you, make sure you go through a reputable agency. -
Step 2: Make sure you can make the negotiated monthly payment.
If you don't think you can make the payments, seek other options.
It won't do you any good to enroll in a program only to default on your payments. , Don't rely on a credit counseling agency's verbal promises.
Make sure you get a contract specifying the monthly payments, fees, and length of time necessary until the debts are paid off. , You're probably having trouble making your payments, but at least call your creditors to let them know that you're enrolling in a DMP, and try to pay as much as you can.
They'll likely be willing to work with you, but communication is essential.
Don't stop paying your creditors directly until you are certain the DMP has been approved. , Don't rely on an agency's assurances that the plan has been approved.
Call each of your creditors to make sure they have approved the plan, and verify the terms specified on the DMP contract. , A DMP typically includes only unsecured debts--credit cards and personal loans, for example--and not mortgages, car payments, or late tax bills.
Make sure you understand exactly which debts are being paid by your monthly payments to the DMP, and be sure to keep up with your other bills. , If the DMP isn't set up to match the billing cycles on your debts, your payments may be late (and you may incur additional fees) even if you get your payment to the DMP in time.
Find out when your DMP will disburse payments to creditors (there is often a lag of a week or more), and verify that your payments will reach your creditors by the due dates. , In order for a DMP to be successful, you must make regular payments, and you must make them on time.
In fact, given that DMP agencies sometimes take a bit more time than expected to disburse money to creditors, it's a good idea to get your payments in early.
If you can't make a payment on time, contact the DMP agency to let them know. , You should get an itemized monthly statement, either in the mail or online, from the DMP agency.
While this will most likely be accurate, it's important to check with your creditors to make sure that they have received the agreed-upon payments.
Especially in the first few months, it's a good idea to call your creditors instead of waiting for your monthly statements from each of them. , If your DMP includes lower interest rates, waived fees, or other concessions from your creditors, check your statements to make sure they reflect these concessions.
If something doesn't look right, call both the creditor and the DMP agency to investigate. , Keep all your statements, as well as the DMP contract, at least until the debts have been completely paid off and you have received written confirmation of this from your creditors.
This way you'll have evidence of your payments should any dispute arise. , Order your credit report--you can get a free copy once a year in the U.S.--and make sure that your debts are being reported accurately.
If your accounts are supposed to be reported as current, make sure they are.
It will take time for your credit to improve significantly, but be patient.
If you continue to make your regularly scheduled payments, you're credit rating will improve, especially once you've got your creditors paid off completely. , Many DMPs stipulate that you must not accrue any new debt or apply for additional credit, though some of these allow you to take out a mortgage or car loan if necessary.
Your creditors will periodically check your credit report to find out if you have applied for more credit, and if you have, they may back out of the DMP.
The best reason, however, to avoid taking on more debt is that doing so is counterproductive to your goal of becoming debt-free. , Credit counseling should be a holistic enterprise which not only helps you pay off your current debts but also teaches you how to budget and save money.
Take advantage of credit counseling offered through your DMP agency--any good agency will offer educational materials and counseling--to make a budget and learn more about financial matters.
Once you have a budget, stick to it.
Only by controlling your spending will you become, and remain, financially secure. -
Step 3: Get the DMP plan in writing.
-
Step 4: Make your regular payments to creditors until they have accepted the DMP proposal.
-
Step 5: Make sure your creditors have approved the program proposal before paying your first monthly payment to the credit counseling agency.
-
Step 6: Keep up with your other bills.
-
Step 7: Make sure your payments will get to your creditors on time.
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Step 8: Make your payments on time each month.
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Step 9: Verify that your payments have been received.
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Step 10: Check your credit card and loan statements to make sure they reflect the terms of the DMP agreement.
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Step 11: Keep copies of your statements from your creditors and from the DMP.
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Step 12: Check your credit report once a year.
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Step 13: Avoid incurring any more debt or applying for new loans.
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Step 14: Develop a healthy relationship with money.
Detailed Guide
The credit counseling and debt management industry is, unfortunately, infested with companies that are all too willing to take advantage of people who are already in money trouble.
Choose the wrong program, and you could quickly end up in worse shape than before.
Seek real credit counseling before enrolling in a DMP, and carefully consider other options, such as negotiating with creditors yourself.
If you do decide that a DMP is right for you, make sure you go through a reputable agency.
If you don't think you can make the payments, seek other options.
It won't do you any good to enroll in a program only to default on your payments. , Don't rely on a credit counseling agency's verbal promises.
Make sure you get a contract specifying the monthly payments, fees, and length of time necessary until the debts are paid off. , You're probably having trouble making your payments, but at least call your creditors to let them know that you're enrolling in a DMP, and try to pay as much as you can.
They'll likely be willing to work with you, but communication is essential.
Don't stop paying your creditors directly until you are certain the DMP has been approved. , Don't rely on an agency's assurances that the plan has been approved.
Call each of your creditors to make sure they have approved the plan, and verify the terms specified on the DMP contract. , A DMP typically includes only unsecured debts--credit cards and personal loans, for example--and not mortgages, car payments, or late tax bills.
Make sure you understand exactly which debts are being paid by your monthly payments to the DMP, and be sure to keep up with your other bills. , If the DMP isn't set up to match the billing cycles on your debts, your payments may be late (and you may incur additional fees) even if you get your payment to the DMP in time.
Find out when your DMP will disburse payments to creditors (there is often a lag of a week or more), and verify that your payments will reach your creditors by the due dates. , In order for a DMP to be successful, you must make regular payments, and you must make them on time.
In fact, given that DMP agencies sometimes take a bit more time than expected to disburse money to creditors, it's a good idea to get your payments in early.
If you can't make a payment on time, contact the DMP agency to let them know. , You should get an itemized monthly statement, either in the mail or online, from the DMP agency.
While this will most likely be accurate, it's important to check with your creditors to make sure that they have received the agreed-upon payments.
Especially in the first few months, it's a good idea to call your creditors instead of waiting for your monthly statements from each of them. , If your DMP includes lower interest rates, waived fees, or other concessions from your creditors, check your statements to make sure they reflect these concessions.
If something doesn't look right, call both the creditor and the DMP agency to investigate. , Keep all your statements, as well as the DMP contract, at least until the debts have been completely paid off and you have received written confirmation of this from your creditors.
This way you'll have evidence of your payments should any dispute arise. , Order your credit report--you can get a free copy once a year in the U.S.--and make sure that your debts are being reported accurately.
If your accounts are supposed to be reported as current, make sure they are.
It will take time for your credit to improve significantly, but be patient.
If you continue to make your regularly scheduled payments, you're credit rating will improve, especially once you've got your creditors paid off completely. , Many DMPs stipulate that you must not accrue any new debt or apply for additional credit, though some of these allow you to take out a mortgage or car loan if necessary.
Your creditors will periodically check your credit report to find out if you have applied for more credit, and if you have, they may back out of the DMP.
The best reason, however, to avoid taking on more debt is that doing so is counterproductive to your goal of becoming debt-free. , Credit counseling should be a holistic enterprise which not only helps you pay off your current debts but also teaches you how to budget and save money.
Take advantage of credit counseling offered through your DMP agency--any good agency will offer educational materials and counseling--to make a budget and learn more about financial matters.
Once you have a budget, stick to it.
Only by controlling your spending will you become, and remain, financially secure.
About the Author
Virginia Martin
With a background in digital media and internet, Virginia Martin brings 14 years of hands-on experience to every article. Virginia believes in making complex topics accessible to everyone.
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