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Should You Cancel Your Debt Management Plan?

A debt management plan (DMP) can be a lifesaver when you’re struggling with credit card debt. It offers lower interest rates, reduced monthly payments, and a way to keep debt collectors at bay. However, there may come a time when you consider canceling your DMP. Whether your financial situation has improved or you’ve found a better way to manage your debt, it’s crucial to understand the implications of canceling your DMP. Here’s what you need to know.

Can You Cancel a Debt Management Plan?

Yes, you can cancel a debt management plan at any time. A DMP is a voluntary agreement between you, your creditors, and a credit counseling agency. Typically lasting three to five years, a DMP helps make your unsecured debt—usually credit card balances—more manageable. However, if you decide that the plan is no longer working for you, you have the option to cancel it.

Reasons to Consider Canceling Your DMP

• Your financial situation has improved, and you no longer need the DMP.
• You’ve received a windfall of cash and can pay off your debt in full.
• You no longer want to pay the plan’s monthly fee.
• The plan is simply not working for you.

Should You Cancel a DMP?

Canceling a DMP can have both advantages and disadvantages. Understanding these can help you make an informed decision.

Pros of Canceling a DMP

• Avoid Monthly Fees: Monthly fees on DMPs can vary, but on average, it costs $35 per month, which adds up to $2,100 over five years.
• Pay Off Debt Faster: If your financial situation has improved, you may be able to pay off your debt more quickly, saving you money on interest charges and fees.
• Regain Access to Credit: Canceling your DMP may provide more opportunities to get credit without limitations.

Cons of Canceling a DMP

• Higher Costs: Your creditors will likely reinstate the original interest rates and fees.
• Direct Dealings with Creditors: You’ll have to start making individual payments to each lender again.
• Collection Calls: If some of your debt is in collections, you may start getting calls from the collection agency again.

Is There a Fee to Cancel a DMP?

While canceling your DMP will prevent you from having to pay future monthly fees, the credit counseling agency may charge a fee to cancel the contract. You may also not be able to get a refund of previous fees you’ve paid. Double-check your agreement or speak with your counselor to see what the terms are for your situation.

How to Cancel a Debt Management Plan

Before you proceed, make sure you read the terms of your DMP contract to understand all the potential consequences of cancellation. If you can’t afford to pay off all of your debt immediately, make sure you have alternate plans in place to keep making payments before you cancel your DMP to avoid further consequences. Here are a few ways you can cancel a DMP:

Contact the Agency and Your Creditors

Depending on the agency you’re working with, you may be able to cancel your DMP over the phone or in writing via email, mail, or fax. You’ll also want to notify your creditors of your decision so you can discuss the path forward.

Pay Off Your Debts

There’s generally no penalty for making extra payments on your DMP, and if you can afford to pay off all of your balances at once, that’ll end your agreement early.

Stop Making Payments

In some cases, missing just one payment on a DMP will result in cancellation, while others may allow up to three missed payments. Communicating with your credit counselor and creditors instead can leave a better impression with your creditors and prevent damage to your credit score.

Monitor Your Credit as You Pay Off Debt

Whether or not you decide to cancel your debt management plan, it’s important to keep a close eye on your credit score to understand how your actions impact your overall credit health. With Experian’s credit monitoring service, you’ll get access to your FICO® Score and Experian credit report for free, as well as real-time alerts when changes are made to your credit report. As you work to pay down debt and improve your credit score, keeping track of your progress can help you ensure success.

Contact O1ne Mortgage for Your Mortgage Needs

At O1ne Mortgage, we understand that managing debt can be challenging. If you’re considering canceling your debt management plan and need assistance with your mortgage needs, we’re here to help. Our team of experts is dedicated to providing you with the best mortgage solutions tailored to your unique financial situation.

Call us today at 213-732-3074 to speak with one of our experienced loan officers. Let O1ne Mortgage help you achieve your financial goals and secure the home of your dreams.

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