Can I get a personal loan while enrolled in a debt management plan?

A debt management plan (DMP) is an informal repayment arrangement administered by a nonprofit credit counseling agency. The agency negotiates reduced interest rates with your creditors in exchange for your agreement to make fixed monthly payments and, critically, to not open any new credit during the plan period (typically 3-5 years).

Lenders can see a DMP on your credit report (it may appear as a notation on the enrolled accounts or show in your payment history). Combined with the lower credit scores typical of DMP enrollees and the existing debt load, most prime personal-loan lenders will decline applications from current DMP participants. The few lenders that might approve are higher-rate, and taking a new high-rate loan while trying to pay off existing debt undercuts the plan's purpose.

If you need additional funds while enrolled in a DMP, the right first call is your credit counseling agency. They may be able to request a temporary forbearance from enrolled creditors, renegotiate the plan payment amount, or help you identify other options. Exiting a DMP early by taking a new personal loan typically results in the creditors reinstating their original interest rates and terms, eliminating the DMP's interest savings.

Once you complete the DMP, your credit score typically has improved enough to qualify for mainstream personal-loan products, and the completion is noted positively by creditors.