A Debt Management Plan can be quite beneficial in paying off some of your longstanding debts and other financial obligations. However, you must be curious as to how long debt management plans last in total?
The answer this question is easy: There is no definite schedule as to the duration of the Debt Management Plan. It will go on for as long as there is longstanding debt left. However, there are certain things that you can do to hasten the end of the Debt Management Plan.
STEPS TO SHORTEN THE DURATION OF THE DEBT MANAGEMENT PLAN
- PAY MORE
First off, you can decrease the length of your Debt Management Plan schedule by adding more to what you pay each month. This can happen more effectively if there would be an increase in your personal income and additional funds can be put into the budget for the Debt Management Plan payments.
- SELL OFF YOUR STUFF
Selling some of your high-value belongings will also add your funds and allow you to pay off more of your debt through the management plan. This will shorten your schedule of payment significantly as well.
- ASK CREDITORS TO FREEZE INTEREST RATES
You can also request your creditors to hold off on any interest rates that may occur because of your debt. This will decrease your debt without having to worry about additional costs in the long run.
WHAT TO DO IF CREDITORS WON’T FREEZE YOUR INTEREST RATES
However, while some may agree to your request, most may not. What if this happens? Here is what you can do.
You can factor in the interest rate and add it to the overall payments for the Debt Management Plan. This will help you figure out how long you would have to pay for the plan effectively.
OTHER CONDITIONS THAT DETERMINE THE LENGTH OF THE DMP
There are also certain conditions that can help determine how long you would have to pay for the Debt Management Plan. Here they are as follows:
1. THE NUMBER OF DEBTS YOU OWE
The more debts you have, the longer it would take for you to pay them all.
2. YOUR PAYING CAPABILITIES
Your income may have been a significant impact on the length of your Debt Management Plan. A higher income entails a stronger capability to pay off more of the debt in a shorter amount of time and vice versa.
3. AGREEMENTS WITH CREDITORS
You may be able to lower the number of payments you owe and those you would have to pay for through the DMP depending on your agreement with the creditors.
If for example, your circumstances change, and you would be able to pay more of your debt, your creditors may allow you to increase your payments. Inversely, if you are not able to pay the original amount anymore, your creditors may give you a break and lower your payments significantly.
Other agreements with creditors are already mentioned above.
CALCULATING THE LENGTH OF YOUR DEBT MANAGEMENT PLAN
Before going into a Debt Management Plan, to begin with, you have to calculate how much time you would need to pay off your debts. This will help you avoid more issues down the line. Here is a specific set of factors that you can use to calculate the duration of payments for your DMP.
- Add up all the accumulated amount of debts in your Debt Management Plan.
- After this, divide the total debt amount by how much you will be willing to spend to pay for it each month. This will yield the number of months that it will take to pay off the plan in total.
- Once you get this number, you can now divide the amount by 12 so as to get how many years it would take for you to pay off your debt completely through the DMP.
For example: if you owe $5000 and would want to allot at least $200 for the Debt Management Plan each month, here is what it would look like as a computation:
$6000 ÷ $200 = 30
This means that you would have to pay the Debt Management Plans for 30 months in total. Now to calculate how long you would have to pay in terms of years, here is the computation:
30 ÷ 12 = 2.6
The above computation shows that it would take you at least 2 years and six months to pay off a total debt of $6000 if you pay with $200 intervals for 30 months.
ELIGIBLE TYPES OF DEBT FOR THE MANAGEMENT PLAN
Fortunately, you can include most of your unsecured debts in the management plan. These are as follows:
- Payday loans
- Personal loans
- Catalog repayments
However, if you have secured loans such as mortgages and utility bills as well as car financing obligations, these can it be paid off with a DMP. It will help you to keep these in mind if ever you would think about setting up a Debt Management Plan.
WHO TO CONSULT WHEN SETTING UP A DEBT MANAGEMENT PLAN
If you ever need to set up a Debt Management Plan, it would help you to consult various financial institutions and debt consolidation firms to find out everything that you can about this particular financial solution.
By doing this, you will be properly informed before making a final decision. It would also help you to consult anyone who has already enrolled in a Debt Management Plan beforehand. This way, you will also have a nonprofessional view of the Debt Management Plan to rely on when making a decision.
CLOSING STATEMENT
Knowing how your Debt Management Plan will last can definitely help you budget your money even more effectively than before. It is important to take note of this piece of knowledge before embarking on this longstanding solution to your financial problems.
In short, you should find out everything that you can about your payment schedule as well as the plan itself before engaging in it. This way, you will not end up having to pay for your debt much longer than necessary.
RESEARCH QUESTIONS
Can I shorten the duration of the Debt Management Plan?
Yes. Do the following steps.
- Increasing monthly payments
- Holding a garage sale
- Asking creditors for a break on the interest rates
Who should I talk to about the Debt Management Plan in general?
- Financial Consultation Institutions
- Banks
- Debt Consolidation Firms
Can I pay for all kinds of debt using the Debt Management Plan?
No. There are only certain types of debt that can be paid for through the Debt Management Plan. These are mostly unsecured debts such as payment and personal loans as well as catalog repayments.
Mortgages and utility bills are usually not included.
What is the formula for calculating the length of the Debt Management Plan?
Total Amount of Debt ÷ The Amount You’re Willing to Pay ÷ 12 months = Length of DMP