Debt Management Calculator & Savings Estimator
How much can you save with a debt management program?
Getting into debt is much easier than getting out of debt, especially when you’re dealing with the high-interest rates associated with credit cards and lines of credit. If this is the case for you, then a debt management program might be the right choice. A debt management program, or DMP, is a cost-effective way to pay back everything you owe.
A non-profit credit counselling agency is the one that administers the DMP. They negotiate with lenders on your behalf to eliminate or lower interest rates and monthly payments. Using this debt management calculator can give you some tips on how to better maximize your debt repayment.
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What is a debt management program?
A debt management program is a type of consolidation that’s a little different than other debt-relief options. A trained credit counsellor from a non-profit credit counselling organization works with debtors to develop a plan focused on their financial goals. Unlike a debt consolidation loan or balance transfer, you still owe your creditors and pay back everything you owe, just at much lower interest rates.
A DMP can be set up through a non-profit credit counselling agency. You’ll make your payments to them, and they in turn will make payments to your creditors at reduced or eliminated interest rates on a fixed schedule. This will cut down on the amount of money going towards interest charges, getting you out of debt faster.
How does a debt management plan lower my monthly payment?
Credit cards, when compared to other types of credit like mortgages and car loans, have extremely high-rates, typically 19.99 to 29.99 percent. When balances are high and interest fees are charged, the majority of your monthly payment goes towards the interest, not the principal, which is what you owe. Sometimes you may barely be putting a dent in the balance owed as only a few dollars of your payment may go towards paying it down.
Minimum payments aren’t much help either. With the high-interest fees charged, they are an inefficient way to get out of debt. Schedules set for minimum payments are typically calculated at 2% to 5% of the balance owed. This means that as the debt increases and balances grow, so too do the interest fees charged. In some cases, even the minimum payment becomes unaffordable.
A debt management program negotiated by a credible non-profit credit counselling organization reduces those interest rates to 0 to 11 percent, depending on the debt. This offers enormous benefits to consumers as they’ll actually start making regular payments on the amount they owe, not the high-interest fees.
Another benefit of lower or eliminated interest rates is that people can get out of debt even faster. The debt management program makes a consumer’s money work smarter for them by maximizing the amount of money being paid on each debt. It’s a cost-effective way to get out of debt and pay back what you owe without worrying about the damaging effects of bankruptcy.
A debt management program is not a settlement and won’t be reported as such. Your debts are also paid off in full and not as much is wasted or thrown away on the interest fees that racks up.
How much do clients save?
Savings are based on:
- How much do you owe?
- What are your new interest rates?
- How much can you afford to pay with a working, monthly budget?
Although results vary between consumers, history shows that a debt management program can save a client up to 30 to 50%, on average.
How much does a debt management program cost?
Speaking with a credit counsellor for an assessment is completely free. In fact, the majority of our services come at no cost. You’ll get some solid advice about your situation and debt relief options available straight from a trained non-profit credit counsellor.
If it turns out that a debt management program is your best option and you elect to move forward with it, there are some nominal setup fees that you’ll need to pay. Fees vary depending on how much debt you carry but are capped nationally at $59 and included in the monthly payments. Compared to other solutions like debt settlement and consolidation loan options, a DMP is a relatively low-cost option for getting out of debt. Use the calculator below to see how much time and money you can save now.