To qualify for a DMP, there are some general guidelines. Acceptance criteria is set by the individual creditors, not by the counseling agency, and will vary from creditor to creditor.
Here are some typical creditor requirements:
>Generally the account must have been open for at least 9 months.
>Generally the account cannot be charged off or more than 6 months' delinquent. (some creditors will accept a proposal on a CO account, others will not)
> You may be accepted if you exceed the creditor's "maximum agreements" limit. Some will not allow more than one DMP agreement or hardship plan over an account's history.
> Most creditors require you to include all your accounts with them if you include any one of them, if you have multiple accounts with the same creditor.
Typical Counseling agency requirements:
>You must have sufficient income to fund the DMP. Some counselors will not offer you a DMP if you cannot make the payments, and will require a preliminary budget analysis.
Those that do? Tread carefully..it may not be your best interests they have in mind.
>Some counselors will require you to include ALL your revolving accounts, others will not and will allow you to retain one or two cards to use.
Calculating your payments under a DMP is fairly simple as most creditors offer the same payment plan and interest rates no matter which counseling agency you use. As long as the agency is approved by the creditor, they will be offering you the same basic payment plan as any other agency.
Your payment is calculated by:
multiplying your total balance due by the minimum % the creditor will accept.
For example, Citibank may require a minimum of 2.5% of the balance per month. On a $10,000 balance, 2.5% means a payment of $250.00, which will be your plan's payment for that account.
Repeat for each creditor you will be including to arrive at your total monthly plan payment. If your counseling agency is charging a fee, add that amount to your monthly payment. More on fees later-
Interest is calculated:
on a monthly basis, multiply your current balance by the result of: ( APR/12)
For example, Citibank may offer 9.9%- or (9.9 divided by 12) 0.825% per month
Multiply the $10,000 balance by 0.825% to arrive at your monthly interest charges- $82.50
How long will it take to pay off the accounts?
Subtract the interest charges from the monthly payment for that creditor to arrive at the amount going to principle monthly.
Divide your total balance owed to that creditor by that monthly principle payment to arrive at the number of months to pay the account off.
For example: $10,000 balance, plan payment of $250/month. Of that $250, $82.50 pays off that month's interest leaving $167.50 to pay down the balance.
$10,000 / $167.50 = 59 months- or 4.9 years.
What about fees?
Most debt management plans include fees which range from $0 to $50 or more per month. Some charge a "set up" fee.
Beware those that retain your first month's plan payment as the "setup fee", you will almost certainly end up late with each of your creditors. A better plan is to charge the setup fee, if any, as a separate charge.
Many credit unions partner with a credit counseling agency, Balance (balancepro.net) and Greenpath (greenpath.com) are perhaps the most common.
If you are a credit union member and your CU partners with such an agency, often the CU will pay the fees on your behalf. Ask.
Some common** Minimum Payment percentages and interest rate concessions:
Citibank: 2.3% 9.9%
Chase: 2% 6% (may offer better terms if repaid outside of a DMP using internal repayment plan)
Discover: 2.2% 6.99%
Bank of America: 1.8 % 0% to 16% depending on situation (May offer better terms if repaid outside of a DMP using internal repayment plan)
Barclays/Juniper Bank: 2% 6% (if customer is 30 days or more past due, rate will be higher if account is current)
Wells Fargo: 2.25% 7.5%
HSBC: 2.25% 9%
Capital One : 2.00% 7.5%
American Express 2.2% 9.9% (requires acceptance, based on consumer's circumstances) (no longer requires account to be brought current first) (will charge off accounts included in DMP)
GEMB issued cards: No concessions offered, may write off a portion of overlimit fees
HFC /Beneficial Loans: 75% of contractual monthly payment 9%
American General Loans :No concessions or reductions generally offered
** presented as an example of typical agreements and believed accurate as of 07/09. Please ask your counselor for current payment and interest figures.
Late and over limit fees:
Typically late and overlimit fees added on to your account before your proposal is accepted will remain. Certain creditors may write off excessive fees in specific circumstances, but there are no hard guidelines for doing so.
No additional late/overlimit fees should be assessed after your proposal has been accepted by the creditor.
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How can I calculate my estimated DMP payments?
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