Pros and Cons of a Debt Management Program - Impact on Credit, Etc.
There are pros and cons to a Debt Management Program (DMP). Finding a solution that works for you in the long run, and affects your credit as little as possible, will ease your money worries and let you sleep better. There are many debt relief options and considering the advantages as well as the disadvantages of each one is important as you look for ways to consolidate your debts and become debt free.
Advantages / Pros of a Debt Management Program
Because of the way a Debt Management Program is structured and administered, it has a number of notable advantages when compared to other forms of debt relief. To get onto one of these debt management plans, you need to go through a provincially licensed credit counselling organization. One of their Credit Counsellor can explain to you all of their program's advantages in full and answer any specific questions you may have. Some of the key advantages of this debt consolidation option include being able to repay your debts more quickly, only having one payment each month, and getting help to rebuild your credit rating when you’re done. Here are some more pros or advantages:
- All unsecured debt is paid off within 5 years. The average is typically less than 3 years
- Interest rates are eliminated or significantly reduced
- Debts are reduced to one monthly payment & creditors stop harassing you
- You receive lots of support while you're on this repayment program: free one-on-one debt help, budgeting workshops and credit education
- Peace of mind and less stress about money; you can sleep better at night
- They offer to help you rebuild your credit rating
- You aren’t required to sell your home, your car, or any other assets
- Only your creditors know that you are on a Debt Managment Program, unlike Bankruptcy or a Consumer Proposal which are a matter of public record
- All debts included in the DMP are erased from your credit reports 2 years after you finish the program or 6 years after you start - whichever comes first. No other debt relief program is removed from your credit reports this quickly.
Disadvantages / Cons of a Debt Management Program
There are also a number of disadvantages to a Debt Management Program - most notably that it is reflected on your credit report that you are receiving help from a third party to repay your debts. However, repaying your debt is better than struggling to make partial payments, making no payments, or declaring bankruptcy. If you choose to meet with a Credit Counsellor, they will explain all of the disadvantages to you, and answer any questions you might have. Here is our list of cons or disadvantages with a Debt Management Program:
- Depending on how much you owe, who your creditors are and your income situation, it's not the right solution for everyone
- Your creditors must agree with you and your Credit Counsellor that this program makes sense for your situation
- It is noted on your credit report that you are making payments on a debt management plan (which is of course better than not being able to repay your debts at all)
- You need to make a payment each month
- It impacts your credit for 2 years after you complete the program or 6 years from when you start your program - whichever is sooner
- For-profit credit counselling companies charge very large fees for this program, but these can be safely avoided by working with a non-profit service
Contact Us for More Info About the Advantages & Disadvantages / Pros and Cons of a DMP
You can find out more about the pros and cons of a Debt Management Program by contacting the Credit Counselling Society, and learn if it or something else is the best fit for your situation. Our job is to help people figure out their best options and then help them create a plan to move forward in whichever direction they choose to go. If you would like to make a free, confidential appointment to discuss your situation in more detail with one of our Credit Counsellors, and to see if a DMP or something else is the right option for you, we're happy to arrange your appointment when you call, 1-888-527-8999.