Back

Pros and Cons of Using a Debt Management Plan

Utilizing a debt management plan (DMP) to reduce your credit card interest rates and lower your monthly payments may seem like a great idea, but there are some drawbacks as well. Whether or not a debt management plan is the right move for you will ultimately depend on your unique financial situation.

Before taking the leap, it’s important to understand debt management plan pros and cons.

Pros

You only need to make one monthly payment

With a debt management plan, you no longer need to worry about making multiple payments each month. Instead, you only need to make one payment to your credit counseling agency.

The credit counseling agency will then make the payments to the creditors on your behalf. This is especially useful if you have a lot of accounts or struggle to keep track of due dates.

With one monthly payment, you’ll no longer have to juggle a complex payment calendar or the constant stress of late fees.

As long as you make the payment to your credit counseling agency on time, you can take it easy for the rest of the month.

You may be able to secure lower interest rates

As part of your debt management plan, your credit counselor will try to negotiate lower interest rates on your behalf.

When it comes to credit card debt and other unsecured loans, high interest rates can drastically increase your monthly payments. Luckily, the reverse is true, too.

Lower interest rates often mean lower monthly payments.

You should be able to pay off your debt faster

With negotiated terms and lower interest rates, most people with a debt management plan pay their debts within three to five years.

With a lower interest rate, you will be able to save money on payments and more of your payment can be applied to the principal balance.

As a result, you might be able to pay off your debt even faster.

Cons

You are required to close your credit card accounts

Any credit card that is included in your debt management plan must be closed. This ensures that you are not taking on more debt while you pay back your current balance.

It also ensures that you are using the lower interest rate and debt management plan perks from for their intended purpose.

Even if you have a credit card that isn’t included in your DMP, you’re advised against using it, except in case of emergency.

The creditors involved in your DMP can monitor your spending. If they notice new debt, they might ask you to close the account.

You must make consistent payments to keep the benefits

In order to keep the benefits of your debt management plan—lower interest rate, smaller monthly payments and more—you must make consistent monthly payments.

If you don’t, you might lose the benefits. Debt management plans work best for people who are committed to financial change and plan to uphold their end of the agreement.

Not all creditors participate

Even though most creditors participate in debt management plans, some don’t. Although your credit counseling agency will negotiate on your behalf to secure the best terms, the conditions and benefits are ultimately determined by the creditor.

Although it is rare, one or more of your creditors might refuse to participate and if that happens, a debt management plan might not be the best option.

Bottom line

The only way to truly determine whether or not a debt management plan is right for you is to meet with a certified credit counselor. Appointments are free and counselors are available 24/7. Money Management International has trained financial counselors ready to take a comprehensive look at your finances and offer recommendations.

A woman in her fifties hugging her dog in a park.
Take the Next Step
Make the most of your money and connect with one of MMI's trained and certified debt and budget counselors!
Get Started
  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.