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Debt Management Strategies: Select the One that is Right for You

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Debt Management Plans: Choose the Right One for You

Review various programs for managing debt’s offerings and prices to find the one that is right for you.

By Sean Pyles Senior Writer | Personal finances and financial debt Sean Pyles leads podcasting at NerdWallet as the producer and host of the NerdWallet’s “Smart Money” podcast. In “Smart Money” Sean talks with Nerds across NerdWallet’s NerdWallet Content team to answer listeners’ questions about personal finance. With a focus on shrewd and actionable money advice, Sean provides real-world guidance to help people improve their financial lives. In addition to answering listeners’ financial questions on “Smart Money,” Sean also interviews guests outside of NerdWallet and produces special segments on topics such as the racial wealth gap and how to begin investing and the background of student loans.

Before Sean was the host of podcasts at NerdWallet He also covered issues that dealt with consumer debt. His writing has been featured on USA Today, The New York Times as well as other publications. When he’s not writing about personal finances, Sean can be found playing in his garden, going for walks, or walking his dog for long walks. Sean is located at Ocean Shores, Washington.

Aug 18, 2021

Editor: Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. In the past, she worked for 18 years working at The Oregonian in Portland in capacities such as chief of the copy desk and team editor and designer. Previous experience included copy and news editing for various Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor’s in mass communication and journalism from the University of Iowa.

Many or all of the products we feature are provided by our partners who compensate us. This affects the products we review and where and how the product is featured on a page. However, this does not influence our evaluations. Our opinions are entirely our own. Here’s a list of and .

Feeling overwhelmed by your debt? A debt management program could be the answer.

The debt payoff tool will put you on the path to pay off your obligations — usually from credit cards over three to five years. With a DMP the debts of several creditors are put into one payment, and creditors lower your interest rate. In the exchange, you are obligated to a payment plan that usually runs three to five years. Be aware that interest rate reductions are standardized for credit counselors across the country, based on your creditors guidelines and your budget.

Here’s a review of debt management plans at some large non-profit .

Agency / availability

Average fees

It is available in all 50 US states.

$31 startup fee

$20 monthly fee

Available in all states , with the exception of Minnesota

Start-up fee of $42

Monthly fee of $30

Available in 50 states as well as Puerto Rico

A startup charge of $24 is included.

$28 monthly fee

It is available in all 50 US states.

$35 for the initial fee

Monthly fee of $29

It is available in all 50 US states.

$35 for the initial fee

$ 24 per month for a monthly fee

Plans for managing debt: Pros and pros and

Pros:

You can cut the interest rate by more than half.

Helps pay off debt faster rather than doing it yourself.

Consolidates several debts into one installment.

Cons:

It is mostly used to pay off credit card debt. It cannot be used to finance student loans or medical debt, nor for tax obligations.

Takes three to five years and you’re typically unable to use credit cards or open new lines of credit during the time you’re in the plan.

Missing a payment can derail the plan and end your interest rate reductions.

It’s time to cut your debt

Sign up to link and keep track of everything from credit cards to mortgages in one place.

Is a debt management plan suitable for you?

DMPs aren’t for everyone. Based on the agency, just 10% up to 20 percent of clients use this debt relief option. Of those who do, about 50% – 70% have completed the plan, depending on the year and how the agency reports the completions.

You might consider an DMP if:

Your unsecured debt like credit cards, ranges from 15% to 39% of your annual income.

You have a steady income and believe you could pay off your debt within five years if you were to pay a lower rate of interest.

You can get by without opening up new lines of credit while on the plan.

Alternatives to a debt-management plan

DMPs may not be the best option for you . Problem debt due to student loans and medical expenses will generally not be covered under such plans. Other alternatives:

If your debt problem is not more than 15 percent of your income then you can try an DIY approach by using the method.

If you have adequate credit to be eligible and you are able to combine your the debts of several creditors into one with a lower interest rate. You control how long the loan is, and you retain the right to apply for fresh credit lines.

You may want to consider this option if your debt is greater than 40 percent of your income and there is no way to pay the debt off in five years. This debt relief tool can rapidly give you a new beginning, and customers have credit scores that begin to rise in as short as six months.

What do you require to do

If you think a DMP could be the best solution to reduce debt, start by . Consider:

Certification and accreditation : Look for an agency which is an active member of the . They require that agencies be certified by an independent group as well as both require certification and an established standard of quality for counselors.

Access: Ask yourself which method you’d prefer to use to get services: via telephone, in person or online.

Cost: Fees differ based on agency, the state you live in and your financial need. Before signing up, verify how much you’ll have to pay each month towards your debt as well as fees.

Author bios: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.

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