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Key takeaways

  • Debt management plans (DMP) make debt payment easier and more efficient, so you can be free in five years or less.
  • You work with a credit counselor who negotiates a DMP with your creditors for a few fees. Avoid collection calls, save on interest, and get out of debt faster.
  • Debt management plans are only for unsecured debt, including credit cards, personal loans, and medical bills.

Debt management programs can be your way out of debt. Experian reported that 340 million Americans carry some form of unpaid bills. By the end of 2023, the average amount of credit card debt was $6,365 and the numbers keep going up.

A debt management plan (DMP) can help you manage your money, reduce your monthly payments, and find a way to pay off your debt. The catch is they can take several years to complete.

If you’re paying bills every month and not making a dent in your debt, read on and see if a debt management plan is the answer for you.

How do debt management plans work?

Debt management plans are structured repayment plans designed to help you pay off your debts efficiently and save money. You work with a credit counseling agency to create a payment plan that fits your budget. The agency negotiates with your creditors to reduce interest rates, lower monthly payments, and waive late fees. You make one monthly payment to the counseling agency who pays your creditors according to the agreed upon payment schedule.

A DMP essentially rolls all your unsecured debts into one affordable monthly payment. It simplifies the repayment process and reduces the total financial burden. Stick with the plan, and you’ll pay off your debts in 3 to 5 years.

A big drawback is that you will have to close your credit card accounts and cannot open new ones until you’ve completed the DMP. You may be allowed to keep one card for emergencies or business purposes. Other than that, no more credit until your dues are paid off.

Tips on debt relief

How can a DMP help?

A DMP can lower your interest rate, making your monthly payments more affordable. For example, say you have $20,000 in outstanding balances spread across four cards, with interest rates ranging from 18% to 24%. Your minimum payments are $800 per month. Under a DMP, these rates may be reduced to 8%, lowering your monthly payment to $500.

The best credit management companies not only simplify your payments but also help you avoid indebtedness in the future. Certified credit counselors will help you create a realistic budget, work with you to reduce your expenses, and teach you how to better manage your money.

What do credit counselors do?

Credit counselors provide financial advice and personalized credit management services to help people manage and reduce their debt. They can set up a debt management plan and negotiate with creditors for lower monthly payments. In addition, they offer free financial education and resources, budgeting guidance, and one-on-one counseling sessions to help prevent future money problems. Counselors can provide specific guidance on what happens to credit card debt when you die and how to mitigate any potential issues for your estate.

Types of debt management plans

There are two main types of credit management companies: Nonprofit and For-Profit. Both tend to offer the same services, but their goals and monthly fees differ.


Nonprofit agencies tend to be more reputable. Their goal is to help you repay debts with your best interest in mind. They do charge fees, but the amount will depend on your financial situation. A key advantage of nonprofit DMPs is that they tend to focus on financial education and counseling, helping you develop better money management skills alongside paying off debts.

For Profit

For-profit agencies operate as businesses, meaning their monthly maintenance fees tend to be higher. These companies provide the same services but might push you to accept a deal that’s good for them but may not be best for you. The main draw of for-profit agencies are the more personalized service options and aggressive negotiation on your behalf.

How to choose a debt management program

Conduct a thorough review to ensure that the credit management company is legit, as there are plenty of scams. Find out the average monthly fee, success rate, average completion time, and transparency of its services.

Look for agencies accredited by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). The agency should have certified credit counselors. Read reviews on Better Business Bureau and Consumer Affairs so you can also see customer testimonials and how they handle complaints.

How does it affect credit scores

improve credit score

DMPs can both hurt and improve your score. Initially, enrolling may lead to a slight dip in your score. This initial decrease is primarily due to creditors closing or suspending accounts to prevent further borrowing. Closing an account reduces the average age of your credit history and increases your utilization ratio, both factors that determine scores.

Overall, a DPM can positively affect your credit score. As part of the plan, you’ll be making consistent, on-time payments. A positive payment history is the most important scoring factor. Moreover, reducing the total amount of money you owe improves your utilization ratio, another critical factor in calculating scores. It’s important to note that the benefits of a DMP on your score are often realized gradually as you pay off your balances.

While there may be a short-term dip when entering a DMP, the long-term effect tends to be positive.

Who is it best for

A debt management plan is an effective way to repay debts. Like all programs, though, it is not for everyone.

The ideal candidate

DMPs are best if you have high interest unsecured debt. For a DMP to work, you must have a steady enough income to handle fixed monthly payments and a monthly fee.

The less than ideal candidate

DMPs are not the best fit if you have secured debt like mortgages or auto loans or if the amount you owe is so small that you can fix it with better budgeting.

If your income is too small to cover basic living expenses, then a DMP is not for you. To enroll in a DMP, you must be able to make monthly payments. One approach to how to pay off debt with no money is to negotiate a debt settlement. Another option to consider is consolidating debt into a loan or getting a second job.

Everyone’s circumstances are different; there is no best debt management plan for everyone. It’s a good idea to talk with a credit counselor as they can offer better debt solutions tailored to your specific financial situation.

Pros of a debt management plan

Financial education and support

Nonprofit credit counseling agencies offer articles, workbooks, and other financial resources to help you better manage money and live within your means. Counselors work with you to develop budgeting skills, understand financial principles, and create a sustainable financial future so that you’ll avoid further debt.

Lower interest rates and waived fees

Credit counselors negotiate with creditors on your behalf for reduced interest rates and waived late fees or penalties. On average, they’re able to lower APRs (annual percentage rates) down to 8%. This can significantly reduce the total debt, making it easier for you to pay down your balances faster.

Affordable monthly payments

DMPs consolidate debt into a single, manageable monthly payment tailored to your budget. This structured approach simplifies your finances, making bills easier to manage.

Cons of a debt management plan

Not suitable for all debts

You can only use a DMP for unsecured debts like cards, personal loans, and medical bills. Student loans, auto loans, and other secured loans are not eligible.

Credit counseling agencies charge fees

Most DMPs charge setup and monthly maintenance fees. The monthly fee will vary by agency, state you live in, amount owed, and income level. These fees can add up, slightly reducing the overall savings from lower interest rates and waived fees.

Limited credit use

Participating in a DMP usually requires you to close or suspend your credit card accounts. This limitation can restrict your ability to borrow during the repayment period, making it difficult to handle unexpected expenses or emergencies.

How do I enroll in a debt management plan?

Enrolling in a DMP is straightforward. Find a nonprofit credit counseling agency and set up a meeting. The initial session is usually free.

  1. The certified credit counselor will assess your financial situation – income, expenses, and debt. The counselor will help determine how you found yourself in this situation and the best way to get out.
  2. The counselor will perform a soft pull—it will not affect your score—to verify that balances and payments are recorded correctly.
  3. They will make recommendations on how to decrease spending, increase your income, and adjust your budget.
  4. They will suggest debt relief options based on your income and the amount owed. If a DMP is good for you, you can sign up immediately.
  5. When you enroll, the counselor will create a realistic budget and negotiate with creditors to set up a payment plan with reduced interest payments and waived fees.
  6. Once both you and the creditors agree on the terms of the plan you can officially begin.

The counseling agency will charge a set-up fee and a monthly fee. You may be eligible for a fee-waiver if you meet certain income qualifications.

The top debt management companies

We’ve compiled a list of the top credit management companies – all are members of the National Foundation for Credit Counseling (NFCC). We have also listed their average fees. The exact fees vary by state and amount owed.

Cambridge Credit Counseling Corp

Cambridge Credit Counseling Corp is a non-profit organization that offers free credit counseling and financial education.

  • Initial fee: $40
  • Monthly fee: $30

American Consumer Credit Counseling

American Consumer Credit Counseling (ACCC) is a non-profit organization that has provided free credit counseling and ongoing financial education since 1991. 

  • Enrollment fee: $39
  • Monthly fee: $7 per account (capped at $70)

InCharge Debt Solutions 

InCharge is a non-profit credit counseling agency that offers free financial education and bankruptcy counseling. 

  • Setup fee: $75
  • Monthly fee: $33

GreenPath Financial Wellness 

GreenPath Financial Wellness is a non-profit organization known for its customer-centric approach and extensive educational resources.

  • Enrollment fee: $35
  • Monthly fee: $28

Money Management International (MMI)

MMI is one of the largest and oldest counseling agencies offering a wide range of services, including free credit counseling, financial education, and housing counseling. 

  • Setup fee: $33
  • Monthly fee: $25

Do you have accounts in collection?

Creditors can sue but we can help.

How can a debt management plan impact my interest rates?

Lower interest rates

When you enroll in a plan, your counselor will negotiate with your creditors for lower interest rates. The exact reduction varies, but it’s not uncommon for interest rates to be reduced to around 8%. Sometimes, they go as low as 2%.

A lower interest rate can lead to affordable monthly payments, significant savings, and make it easier for you to pay down the principal faster.

What if a creditor doesn’t agree to participate in a DMP?

Most creditors are willing to participate in a DMP as it increases the likelihood that they will be paid. If your creditor refuses to participate, the original terms of your debt remain and you’ll have to pay them separately. Don’t panic; your credit counselor can help you budget for this second payment.

Alternatives to a debt management plan

If you’re unsure what could be a good option available to you if you are behind on loan payments but aren’t sold on a DMP, consider the following alternatives:

Debt Consolidation Loans: These loans combine multiple debts into a single loan with a lower interest rate. They simplify repayment and save you money on interest. However, it requires a good credit score to qualify for favorable terms.

Debt Settlement: Settlement is when you hire a company to negotiate with creditors to accept a lower lump-sum payment. It can significantly reduce what you pay, but will hurt your credit score, has tax implications, and hefty fees. When considering debt management vs. debt settlement, think about your overall financial health.

Bankruptcy: Filing for bankruptcy can discharge most of your debts, but it severely impacts your credit score.

DIY Debt Repayment: Strategies like the snowball or avalanche method involve prioritizing bills based on balance size or interest rate. These approaches require discipline and budgeting skills but can be effective without involving third parties. Another strategy is negotiating directly with lenders for a reduced payment.

Owe over $10,000 and considering bankruptcy?

Find out if going bankrupt is right for you.

What is the difference between enrolling in a DMP and filing for bankruptcy?

A debt management plan involves working with a credit counseling agency to consolidate outstanding balances into one manageable monthly payment at a lower interest rate. This approach does not erase what you owe but makes debt repayment easier and will not significantly harm your credit score in the long term.

Filing for bankruptcy is a legal process that can lead to the discharge of certain debts, essentially offering a “fresh start.” With Chapter 7 bankruptcy, you have to liquidate all your non-essential assets. Chapter 13 lets you keep your assets, but you must stick to the approved payment plan, which can take 3 to 5 years. The legal proceeding comes with severe consequences. It will remain on your credit report for up to 10 years, making it difficult to obtain credit, buy a car, or even secure employment.

Frequently asked questions

Your score may initially drop because you will have to close credit cards. However, as you make consistent on-time payments, it will go up.

Aim to include all eligible debts since the more you include, the more money you’ll save. Some DMPs have caps on how much you can include.

Absolutely. Let the agency know in advance that you want to pay more so that the additional funds are applied correctly. They will also need to know if it’s on a one-time basis or if you’d like to make extra payments over the next few months.

Yes, collection agencies will stop calling you, though it can take up to three months for the calls to stop completely.

Debt management companies are regulated by state laws and must comply with the Federal Trade Commission (FTC) rules. They must adhere to fee limitations, avoid deceptive practices, ensuring consumer protection and transparency.

Most plans require closing or suspending your credit card accounts to prevent new debt accumulation. You may be allowed to keep one card open for emergencies.

Creditors are notified when your credit counseling agency negotiates with them on your behalf to reduce interest rates and create a repayment plan.

Contact your credit counseling agency immediately. They may be able to adjust your plan. Missing payments can lead to reinstated fees and interest rates or the closure of the plan.

On average, it takes three to five years. The exact timeline depends on the amount you owe, the negotiated interest rates, and your ability to make consistent monthly payments.

Programs typically charge a setup fee of $30 to $50 and a monthly maintenance fee of $20 to $75. Fees vary by agency and state regulations.

Opening a new credit account is typically not permitted. The plan’s goal is to reduce balances, not add to them.

It is challenging to get a mortgage, but not impossible. Lenders will view you as high risk and likely require a strong payment history on the plan, a good FICO score, sufficient income, and a higher down payment.

It’s possible to get approved for a car loan. Look for specialized lenders, be prepared for higher interest rates, and talk to your counselor before proceeding.

Bottom Line

Debt management plans offer a way to get your finances back on track without damaging your credit score. You consolidate payments without a new loan, save money on interest and fees, and pay off your debt in five years or less. There are many advantages to DMPs, but they are not for everyone.

Meet with a nonprofit credit counseling agency to determine the best debt relief options for your circumstances. If a DMP is not the right fit, they will help you find the right alternative to become debt-free fast.

MoneyFor can give you tips on how to get out of debt, find the best credit card, or the perfect job.

About the author

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.