Debt Management Plans, Demystified
How nonprofit credit counseling and DMPs work, what they cost, what they do to your credit, and how to spot legitimate help.
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A debt management plan (DMP) is a structured repayment program arranged by a nonprofit credit counseling agency. You make one payment a month to the agency; the agency distributes it to your card issuers under terms it has negotiated on your behalf.
The core of the deal is the interest rate. Card issuers have standing concession programs for accredited counseling agencies, and rates on enrolled accounts commonly drop from the mid-20s to the single digits or low teens. Late fees are often waived, and past-due accounts are typically brought current after a few consistent payments.
Two things a DMP is not:
- It's not debt settlement. You repay the full amount you owe — the savings come from reduced interest and fees, not a reduced balance.
- It's not a loan. No new borrowing, no credit check to enroll.
Most plans are designed to pay the enrolled debt off completely in three to five years.
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