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Debt Management Plans: Find the One that is Right for You
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Debt Management Plans: Find the Right One for You
Find out about different debt management plans' services and prices to determine the best fit.
by Sean Pyles Senior Writer | Personal financial, financial debt Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet's "Smart Money" podcast. The show "Smart Money," Sean talks with Nerds on the NerdWallet Content team to answer questions from listeners regarding their personal finances. With a focus on shrewd and practical advice on money, Sean provides real-world guidance that can help consumers better in their finances. Beyond answering listeners' money questions on "Smart Money" Sean also interviews guests outside of NerdWallet and produces special segments that explore subjects like the racial wealth gap, how to start investing and the history for student loans.
Before Sean lead podcasting at NerdWallet the company, he also wrote about topics related to consumer debt. His work has appeared in USA Today, The New York Times and other publications. When he's not writing about personal finance, Sean can be found digging around his garden, taking runs and taking his dog for long walks. He lives within Ocean Shores, Washington.
Updated Aug 17, 2021, 9:47PM PDT
Editor: Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, financial management 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 positions such as copy desk chief and team editor and designer. Prior experience includes copy editing and news for various Southern California newspapers, including the Los Angeles Times. She received a bachelor's degree in mass communications and journalism at the University of Iowa.
The majority or all of the products we feature are provided by our partners who compensate us. This influences which products we write about and where and how the product is featured on a page. However, this does not influence our opinions. Our opinions are entirely our own. Here's a list of and .
Are you feeling overwhelmed by debt? A debt management strategy could be the answer.
The debt payoff tool will put you in a position to pay off your debts -- typically from credit cards -- over the course of three or five years. With a DMP, several debts are put into one payment, and creditors lower the interest rate. In exchange, you sign the payment plan which typically is between three and five years. Keep in mind that interest rate reductions are standardized across credit counseling agencies and are based on your creditor guidelines and your budget.
Here's a comparison of the debt management plans at some large nonprofit .
Agency / availability
Average fees
Available in 50 states
$31 startup fee
20 monthly fees
All states are covered, with the exception of Minnesota
$42 startup fee
$30 monthly fee
Available in 50 states and Puerto Rico
$24 startup fee
Monthly fee of $28
In 50 States
$35 for the initial fee
$29 monthly fee
It is available in all 50 US states.
$35 startup fee
$24 monthly fee
Plans for managing debt: Pros and pros and
Pros:
Could cut your interest rate by more than half.
Helps pay off debt faster instead of doing it yourself.
Consolidates debts from several creditors into one payment.
Cons:
Is mostly intended for debts incurred through credit cards; is not suitable to pay for student loans, medical debt or tax obligations.
Takes three to five years to complete, and generally you're not allowed to use credit cards or get new credit lines during the time you're being on the plan.
In the event of a missed payment, it could derail the plan and stop your interest rate reductions.
It's time to cut your debt
Register to join the link and keep track of everything from credit cards to mortgages from mortgages to credit cards all in one place.
Are debt management plans suitable for you?
DMPs may not be suitable for all. According to the agency, only 10% to 20% of clients are able to avail this debt relief option. Of those who choose to, approximately 50% to 70% of them complete the plan, depending on the year and how the agency records completions.
It is possible to think about an DMP If:
The amount of debt you are unable to pay off like credit cards, ranges from 15% to 39% of your annual income.
You have a steady income and think you could repay your debt in five years if you had an interest rate lower.
You can get by without opening any new lines of credit while in the plan.
Alternatives to a debt-management plan
DMPs are not always the . Problem debt from student loans and medical expenses will generally not be covered under such plans. Other options:
If the amount of debt you are struggling with is not more than 15 percent of your annual earnings You can take the DIY approach by using the method.
If you have good enough credit to qualify, can also gather debts into one at a lower interest rate. You control how long the loan is and retain your right to apply for fresh credit lines.
You may want to consider this option could be a better option if your debt amounts to higher than 40 percent of your income, and you have no way to pay it off within five years. The debt-relief tool can quickly give you a fresh beginning, and customers' credit scores can start to rebound in as little than six months.
What are the things you'll need to do to do
If you think that a DMP may be your best choice for debt relief, you should start by . Consider:
Certification and accreditation: Look for an agency that is an affiliate of the . They require agencies to be certified by an independent group as well as both require certification and an acceptable standard of quality for counselors.
Access: Consider what you'd like to receive services: by telephone, in person or online.
Cost: Fees vary by agency, the state you live in, as well as your financial situation. Before signing up, make sure you know how much you'll have to pay each month towards your debt as well as fees.
About the author: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His work has appeared in The New York Times, USA Today and elsewhere.
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