What Is a Debt Management Plan?

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What is a debt management plan?
How does a debt management plan work?
Where to get a debt management plan
Is a debt management plan right for you?
Pros of debt management plans
- Saves on interest: A credit counselor will try to negotiate lower interest rates as part of your enrollment in the debt management plan. Less interest means it’ll be easier for you to pay down debt, since more money will go to the principal.
- Simplifies debt: Instead of juggling multiple due dates per month, you’ll have only one monthly payment with a debt management plan.
- Gives you a plan: Credit card debt can feel overwhelming, but a debt management plan gives you structure. If you make all payments on time, you know you’ll be out of debt when the program ends.
- Reduces temptation: Having to live without credit cards — and not being able to apply for new credit — might be an advantage if you struggle with overspending.
Cons of debt management plans
- Requires multi-year commitment: A three- to five-year commitment is a long time to keep up with your monthly payment. Before enrolling, make sure you can commit to the payment amount for the duration of the plan.
- Limits access to credit: Having little to no access to credit cards for up to five years, as well as not being able to open new lines of credit, may be anxiety-inducing for some borrowers.
How does a debt management plan affect your credit?
Alternatives to using a debt management plan
Debt consolidation loans
Debt settlement
Bankruptcy
Article sources
- 1. Center for Responsible Lending. Unsafe Harbor: The Persistent Harms of High-Cost Lending. Accessed Jun 6, 2025.
- 2. National Credit Union Administration. Payday Alternative Loans Final Rule. Accessed Apr 17, 2025.
- 3. Center for Responsible Lending. Payday and Other Small Dollar Loans. Accessed May 2, 2025.
- 4. Consumer Financial Protection Bureau. What is a payday loan?. Accessed May 2, 2025.
- 5. Consumer Financial Protection Bureau. Consumer Use of Buy Now, Pay Later and Other Unsecured Debt. Accessed Jan 24, 2025.
- 6. Federal Reserve Bank of St. Louis. Finance Rate on Personal Loans at Commercial Banks, 24 Month Loan. Accessed May 23, 2025.
- 7. National Credit Union Administration. Credit Union and Bank Rates 2024 Q4. Accessed May 23, 2025.
- 8. Consumer Financial Protection Bureau. What are the costs and fees for a payday loan?. Accessed Jun 6, 2025.
- 4. Consumer Financial Protection Bureau. What is a payday loan?. Accessed Apr 17, 2025.
- 10. Consumer Financial Protection Bureau. Truth in Lending Act (TILA) examination procedures. Accessed May 2, 2025.