Is a Debt Management Plan Right for You?
Debt Management Plans, DMPs for short, are designed to help make it easier to pay off your debt. If you are feeling overwhelmed by your debt, a debt management plan could be a good option. Understanding the benefits can help you decide if a debt management plan is right for you.
A Debt Management Plan May Be Right for You If…
1. You have unsecured debt
Debt management plans are good options to eliminate credit card debt, or other debt without collateral, such as medical debt or unsecured collections accounts.
2. You have multiple credit cards with balances
A debt management plan helps simplify things. You make a deposit to your GreenPath account each pay period, and we pay each of your creditors for you each month. Most people set up an automatic payment synchronized with their payday schedule, making it even easier.
3. Your debt has high interest rates, high fees or high minimum payments
Under a DMP, you may be eligible for lower interest rates, lower or waived fees, or reduced minimum payments. GreenPath will contact each creditor for you with a proposal to reduce your interest and fees and save you money.
4. Your budget balances on paper, but you feel like you are struggling – or in reality, you are falling behind
A debt management plan comes with a support team and a clear path to help you pay off your debt. A financial counselor helps you figure out how much you can use for debt payoff and how to cover your living expenses. Automatic deposits on your payday schedule make it easier to stay on track. When you have questions or concerns, GreenPath is here to listen and help.
5. You are frustrated at how long it takes to pay off your debt, or you feel like you just aren’t making progress on your own
If you are stretching or struggling to pay off debt on your own, a DMP can help you make progress more quickly. With lower interest and fees, more of your monthly payment goes toward eliminating your balance, erasing your debt more quickly. The faster you pay off debt, the more you can save.
The very best way to find out if a debt management plan will work for you is to speak with a financial counselor. They will help you figure out if your situation and explain different options that might make sense to pursue, including debt management plans. If you decide to move forward with a DMP, they will walk you through the process.
GreenPath financial counselors are NFCC-certified (National Foundation for Credit Counseling) and we are accredited by the COA (Council on Accreditation). We offer caring, judgment-free credit and debt counseling for free.
Benefits of a Debt Management Plan
- Become debt-free faster. Take years off your payback timeline. GreenPath debt management clients typically become debt-free in three to five years or less.
- Save money. The total amount you pay to eliminate your debt through a DMP is less than what it would clost if you were to pay the minimum payment each month. Typically people pay a similar monthly amount on a DMP as they would on their own – and often we can help you reduce that payment. And, lower interest and fees make it go a lot farther. You could save thousands of dollars with a DMP.
- Stress less. Knowing you have a plan and a team to help you stick to it can bring a huge sense of relief. On average, the stress caused by personal finances fell by 13% in six months after clients engaged in a GreenPath counseling session.
- Simplify life. One payment from you, we take care of the rest. You can even automate it. If you’re more hands on, you have access to your info 24/7 in our client portal.
DMP Reality Checks
Understanding what a DMP will mean in real life is also an important factor in deciding if a DMP is right for you.
- Be ready for your credit score to drop, and then likely rise again over time. Your credit score may drop when your credit accounts are closed. Typically, however, by the end of a DMP, your credit score rebounds because you will have reduced your debt load and you will have a history of on-time payments.
- Be ready to live life without credit cards. The credit accounts in your DMP will be closed. It can be a significant adjustment to eliminate credit cards. Our credit counselors will work with you to create a monthly plan so that you know how much money you have to spend on your essentials.
- Be ready to change spending habits to stick to a new budget. Your DMP will maximize your budget for paying off debt. This probably means you’ll need to make adjustments in other areas, giving up non-essentials while you focus on eliminating debt.
Making the choice to pay off your debt isn’t easy, but it can change your life. We’ve supported hundreds of thousands of people to make this choice and achieve their goal.
Ready to talk to someone? Request a free counseling session.