You can consolidate your debt by joining a Debt Management Program. These Programs work by consolidating all your credit card debt into a single monthly payment. You will then be making the monthly payment to the credit counseling organization that has organized the Debt Management Program. It will be the responsibility of this credit counseling organization to pay off creditors.
Before the Debt Management Program takes effect, your creditors must have agreed to the arrangement. If it is your non-profit credit counselor that has recommended this Program, creditors will typically agree (this is in their best interest since it guarantees they will be paid).
On enrolling in a Debt Management Program, your entire debt will be wiped off in 5 years. However, most Canadians pay off their Program within 3 months for much needed financial freedom.
So, who is DMP meant for?
Other than credit card debt, there are other types of debt that DMP is good for. These are:
If you get a good non-profit credit counselling organization, you will get 0% interest rates (with most major creditors) or rates close to 0% (for smaller creditors). Given the 0% or near 0% interest rate, non-profit credit counseling organizations usually charge a small fee for the Debt Management Program to take care of administration costs.
For-profit credit counseling companies also offer this service, but with higher interest rates since creditors will not allow them to offer lower rates. For-profit companies usually have a large upfront fee (in the thousands of dollars) for the service. You would expect stellar service with this high fee, but in most cases, the service offered does not correspond to the charges. The main reason for this is that most creditors will not work with for-profit credit counselling companies.