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Debt Management Strategies: Select the Best One 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 find the right fit.
Written by Sean Pyles Senior Writer | Personal finance and financial debt Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet's "Smart Money" podcast. The show "Smart Money" Sean talks with Nerds across NerdWallet's NerdWallet Content team to answer listeners' personal finance questions. 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 who are not part of NerdWallet and also creates special segments that explore subjects such as the racial gap in wealth as well as how to get started investing, and the background of student loans.
Before Sean took over podcasting at NerdWallet the company, he also wrote about topics that dealt with consumer debt. His work has appeared throughout the media including USA Today, The New York Times and other publications. When he's not writing about personal finances, Sean can be found playing in his garden, taking runs and taking his dog on long walks. Sean is located in Ocean Shores, Washington.
Updated August 17, 2021, 9:47PM PDT
Written by 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 at The Oregonian in Portland in capacities such as chief of the copy desk and team leader for design and editing. Her previous experience includes copy and news editing for a variety of Southern California newspapers, including the Los Angeles Times. She earned a bachelor's degree in mass communications and journalism from Iowa's University of Iowa.
A majority of the items featured on this page come from our partners, who pay us. This influences which products we write about and where and how the product appears on a page. However, it does not influence our evaluations. Our opinions are our own. Here is a list of and .
Are you feeling overwhelmed by debt? A debt management strategy could be the answer.
This tool for debt repayment puts you in a position to settle your debts -- typically from credit cards -- over three to five years. With the help of a DMP it is possible to have multiple debts rolled into one monthly payment, which reduces your interest rate. In exchange, you sign a payment plan that usually lasts between three and five years. Be aware that interest rate reductions are standard throughout credit counseling organizations, based on your creditors guidelines as well as your budget.
Here's a comparison of the debt management programs at a major nonprofit .
Agency / availability
Average fees
It is available in all 50 US states.
A startup charge of $31 is included.
$20 monthly fee
All states are available, with the exception of Minnesota
$42 startup fee
Monthly fee of $30
The 50 States are represented as well as Puerto Rico
Start-up fee of $24.
A monthly payment of $28 is charged.
It is available in all 50 US states.
$35 for the initial fee
Monthly fee of $29
In 50 States
$35 for the initial fee
$24 monthly fee
Debt management plans: Pros and pros and
Pros:
You can cut the interest rate by half or more.
Aids in paying off debt faster rather than making it your own.
Consolidates debts from several creditors into one payment.
Cons:
Is mostly intended for debts incurred through credit cards; cannot be used to finance student loans, medical debt or tax obligations.
Takes three to five years, and generally, you're not able to make use of credit cards or get new lines of credit when you're in the plan.
In the event of a missed payment, it could derail the plan and stop your interest rate cuts.
It's time to cut your debt
Join the link to sign up and keep track of everything from credit cards to mortgages in one place.
Do you think a debt management program is suitable for you?
DMPs aren't for everyone. According to the agency, about 10 percent up to 20 percent of customers are able to avail this option for debt relief. Of those who choose to, approximately 50% - 70% of them complete the plan, depending on the year and the way the agency reports the completions.
You may want to consider a DMP If:
Unsecured debt, such as from credit cards, is between 15% to 39 percent of your earnings.
You earn a steady salary and think you could repay your debt in five years if you had an interest rate that was lower.
You are able to get by without opening up new credit lines when you're using the plan.
Alternatives to a debt-management plan
DMPs may not be the best option for you . Problem debt from student loans and medical expenses typically aren't covered by such plans. Other optionsinclude:
If your debt problem is not more than 15% of your annual income, you could take a DIY method using the method.
A , if you have adequate credit to be eligible you can also combine debts together at an interest rate that is lower. You control how long the loan is, and you retain the ability to open additional credit lines.
may be better if your debt is more than 40 percent of your income and there is no option to pay it off within five years. This debt relief tool can rapidly give you a new start. Consumers have credit scores that begin to rebound in as little than six months.
What are the things you'll need to do to do
If you think a DMP may be your best option for debt relief, you should start with . Consider:
Certification and accreditation: Look for an agency which is part of the . They require agencies to be accredited by an independent organization, and both require certification as well as an established standard of excellence among counselors.
Access: Ask yourself what you'd like to receive services: by phone, in person , or online.
Cost: Fees vary by agency as well as the state you reside in and your financial need. Before signing up, you should know the amount you'll be paying each month to your debt and in 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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