Debt Management Plan.

In plain English

A debt management plan (DMP) is a repayment program set up through a nonprofit credit counseling agency. You make one monthly payment to the agency, and they distribute it to your creditors, often after negotiating lower interest rates or waived fees. You repay the full amount you owe, just on better terms and a set schedule, usually three to five years. Unlike debt settlement, a DMP does not reduce your balance and is not designed to wreck your credit, though creditors may ask you to close the enrolled accounts.

01Why it matters

If you can afford to repay what you owe but the interest rates are drowning you, a debt management plan can cut the interest and give you one clear payment and an end date, which is often cheaper and safer than for-profit debt settlement.

02The math, step by step

You have three cards totaling $12,000 with interest rates around 24%. A nonprofit credit counselor sets up a debt management plan, negotiates the rates down, and you make one payment of about $350 a month to the agency, which pays your creditors. Instead of paying for years on minimums, you finish in roughly four years and pay far less in interest. Ask whether the agency charges a setup or monthly fee before enrolling.

03What this is NOT

04Receipts

Every figure on this page is sourced to a primary document. Tap to open the original.