About Debt Management Plans

A debt management plan or DMP is a formal plan to repay your creditors that's created by a consumer credit counseling agency. The debt management plan lists your unsecured creditors and minimum monthly payments. Minimum payments on a debt management plan are typically lower than regular minimum payments because credit counselors have negotiated a lower interest rate. Your interest rate can increase if payments are late to your creditors or if your debt management plan ends.

When you're under a debt management plan, you send one lump-sum monthly payment to your credit counselor who then is responsible for sending payments to your creditors. It's still important that you send your DMP payments on time. If you're late on your DMP payment, your payment could be late to your creditor. Late payments could result in termination of your debt management plan. Most debt management plans are completed within two to five years. Some creditors may report your DMP status to the credit bureaus, but according to FICO, receiving credit counseling doesn't hurt your credit score. 

Benefits

Debt management plans can be beneficial if you're having trouble repaying your debts. A debt management plan can have you free of debt much faster than the original terms with the creditor