How Does a Debt Management Program or Plan Work?
How does a Debt Management Program get you out of debt?
If your bank or credit union isn't able to help you consolidate your debts and other debt consolidation options like borrowing money don’t work for you, then a Debt Management Program (DMP) might be right for your situation. People also call a DMP a Debt Repayment Plan or Debt Management Plan. They all refer to the same thing. To some, a Debt Management Program sounds like a loan or a government program. While it's similar to each in some ways, it is a completely different program. Years ago, many provincial governments offered a similar debt management plan, but all of them have since stopped offering it. The main reason is because the Debt Management Program combined with the support and services that non-profit credit counselling agencies offer has been much more effective in providing assistance to Canadians struggling with debt.
How a Debt Management Plan Works - Consolidating Debt Into One Monthly Payment
A debt management plan gets you out of debt by consolidating all of your credit card payments (and many other unsecured debts too) into one monthly payment that you can afford based on your budget. You then make one monthly payment to a licensed consumer credit counselling service like ours, and we disburse the funds to your various creditors every month. Interest rates on your debts are typically reduced to zero. For creditors who won't completely eliminate interest, your interest rate is usually substantially reduced.
If you’re struggling with debt payments, nothing seems to be working, and there appears to be no way out any time soon, a Debt Management Program may be an option for you to eliminate these issues and get back on track. It allows you to privately repay your debts with one affordable monthly payment and does not result in any permanent record.
How to Get on a Debt Management Program and How to Rebuild Your Credit After Program Completion
Your creditors have to agree to allow you to go onto a DMP, but they typically will if one of our accredited Credit Counsellors believes that this program is the right fit for your situation. If you decide to enroll in a Debt Management Program, all of your credit cards and unsecured debt will be paid off within 5 years. However, most people pay off their program as fast as they can, so the average program is completed in less than 3 years. There is no penalty if you can pay your program off faster.
Once you have completed your Debt Management Program, you can begin to rebuild your credit. We have a credit rebuilding program that can help you to re-establish credit as quickly as possible and buy a home or vehicle if that is something you'd like to do. One of the nice things about a DMP is that it's the only formal debt repayment program in Canada that is completely private and has no permanent record. All records of the program and debts paid off through the program are erased from your credit report 2 years after you complete the program.
"Life just happened. My debt got to the point where I started to feel like I was drowning. I didn’t feel like I could fix it on my own, and I wanted to start living my life as an adult without debt. I decided to reach out for help. Feeling relieved, I knew that everything was going to be okay – a lot of work – but okay. I had a plan to pay back my debt and continue doing the things I love to do like yoga and traveling."
- Yasmine, Actual Client
Successfully Complete a Debt Management Program with Help from a Credit Counsellor with The Credit Counselling Society
You can learn more about our Debt Management Program by contacting us and asking any questions you may have. You never know, this program may be the right fit for you, or there may be other options that could possibly fit your financial situation better. If you would like to make a free, confidential appointment to discuss your situation in more detail, give us a call at 1-888-527-8999 to speak with one of our Credit Counsellors.
Below are articles that people who view this page are often interested in.
Pros and Cons of a Debt Management Program
Find out the details of the advantages and disadvantages of the program and see if it sounds like something that might help your financial situation.
Interest Rates & Costs of Debt Management Programs
Learn more about the costs and interest rates associated with Debt Management Progams.