What is a debt management plan (DMP)?

A debt management plan (DMP) is a structured repayment strategy designed specifically to assist consumers in managing and repaying their debts. This approach is typically facilitated by a credit counseling agency, which works closely with creditors to negotiate terms that are more favorable for the debtor. The DMP consolidates multiple debts into a single monthly payment, making it easier for consumers to keep track of their obligations and avoid falling behind on payments.

The key features of a debt management plan include reduced interest rates, lower monthly payments, and the avoidance of late fees, all of which collectively support the consumer in systematically paying down their debt over an agreed timeframe. As such, individuals benefit from the guidance and support of a credit counselor, which can instill a sense of accountability and seriousness in managing their financial responsibilities.

The other choices do not accurately describe what a debt management plan is or involve related concepts that are not applicable. Reducing interest rates on loans is a potential outcome of a DMP, but it is only a part of the overall structure and does not encompass the planning aspect. A government program focused on eliminating student loans does not relate to DMPs, and a personal savings strategy for retirement is a separate financial goal entirely, further highlighting the specific role that debt management