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Debt Management Plans: Find the One that is Right for You
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Debt Management Plans: Choose the Best One for You
Find out about different debt management plans' features and prices to determine the best fit.
By Sean Pyles Senior Writer | Personal finances, credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet's "Smart Money" podcast. In "Smart Money" Sean talks with Nerds across the NerdWallet Content team to answer the questions of listeners about their personal finances. With a focus on shrewd and practical advice on money, Sean provides real-world guidance to help people improve the financial situation of their lives. Beyond answering listeners' money concerns on "Smart Money," Sean also interviews guests outside of NerdWallet and produces special segments to explore topics such as the racial gap in wealth, how to start investing, and the background of college loans.
Before Sean was the host of podcasting at NerdWallet He also covered issues related to consumer debt. His work has appeared on USA Today, The New York Times and elsewhere. When he's not writing about personal finance, Sean can be found digging around his garden, taking runs , and walking his dog for long walks. He is based in Ocean Shores, Washington.
Updated on Aug 17, 2021 9:47PM PDT
Written by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring debt and money management Kathy Hinson leads the Core Personal Finance team at NerdWallet. In the past, she worked for 18 years at The Oregonian in Portland in roles including copy desk chief and team editor and designer. Prior experience includes news and copy editing for several Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in mass communications and journalism from the University of Iowa.
A majority of the items featured on this page are provided by our partners, who pay us. This influences which products we feature and where and how the product is featured on the page. However, this does not influence our evaluations. Our opinions are our own. Here's a list of and .
Are you feeling overwhelmed by debt? A debt management program could be the answer.
The debt payoff tool will put you in a position to settle your debts -- typically from credit cards in three to five years. With a DMP it is possible to have multiple debts put into one payment and creditors reduce your interest rate. In exchange, you sign an installment plan that typically is between three and five years. Note that interest rate cuts are uniform throughout credit counseling organizations that are based on your creditors' guidelines and your budget.
Here's a comparison of the plans for managing debt at a important non-profit .
Agency / availability
Average fees
Available in 50 states
The cost of the initial fee is $31.
20 monthly fees
All states are available, with the exception of Minnesota
Start-up fee of $42
Monthly fee of $30
The 50 States are represented as well as Puerto Rico
$24 startup fee
A monthly payment of $28 is charged.
In 50 States
$35 for the initial fee
Monthly fee of $29
In 50 States
$35 start-up fee
$24 monthly fee
Plans for managing debt: Pros and pros and
Pros:
Can cut your interest rate by more than half.
Aids in paying off debt faster rather than doing it yourself.
Consolidates multiple debts into one installment.
Cons:
This is typically used to pay intended for debts incurred through credit cards; is not suitable to finance student loans as well as medical debts or tax obligations.
The plan lasts between three and five years, and you're generally unable to get credit cards or get new lines of credit during the time you're on the plan.
Missing a payment can derail the plan and cause interest rate reductions.
It's debt-crushing time
Sign up to link and monitor everything from cards to mortgages from mortgages to credit cards all in one place.
Do you think a debt management program is the right choice for you?
DMPs aren't for everyone. Depending on the agency, about 10 20 to 20% of clients are able to avail this debt relief option. Of those who do, around 50% to 70% have completed the program, based on the year and the way the agency reports accomplishments.
You might consider an DMP If:
Your unsecured debt like credit cards, is between 15% and 39% of your annual income.
You earn a steady income and you think you can pay off your debt in five years if you were to pay an interest rate that was lower.
You can get by without opening up new credit lines while you are on the plan.
Alternatives to a debt management strategy
DMPs do not always cover all expenses . Troublesome debts from student loans and medical expenses typically aren't covered under such plans. Other optionsinclude:
If the amount of debt you are struggling with is not more than 15 percent of your income then you can try an DIY approach by using the method.
A , if you've got good enough credit to qualify and you are able to combine your debts into one at a lower interest rate. You have control over the length of time that the loan is and also have the ability to open new credit lines.
You may want to consider this option if your debt is higher than 40 percent of your income and you see no way to pay the debt off in five years. The debt-relief tool could quickly give you a fresh start, and consumers have credit scores that begin to improve in as little than six months.
What you need to know
If you think a DMP might be your best choice for debt relief, start with . Consider:
Certification and accreditation: Look for an agency which is a member of the or the . They require that agencies be certified by an independent group and both require certification and a standard level of professionalism among counselors.
Access: Consider which method you'd prefer to use to get services: over the telephone, in person or online.
Cost: Fees are different depending on the agency and state that you reside in and your financial need. Before you sign up, make sure you know how much you'll be paying each month to your debt as well as fees.
The author's bio: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His work has appeared on The New York Times, USA Today and elsewhere.
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