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Debt Management Plans: Choose the One that is Right for You
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Debt Management Plans: Choose the Best One for You
Compare various options for debt management plan’s services and costs to find the right fit.
By Sean Pyles Senior Writer | Personal finance and debt Sean Pyles leads podcasting at NerdWallet as the producer and host of NerdWallet’s “Smart Money” podcast. In “Smart Money,” Sean talks with Nerds across the NerdWallet Content team to answer listeners’ questions about personal finance. With a focus on shrewd and practical advice on money, Sean provides real-world guidance that can help consumers better the financial situation of their lives. In addition to answering listeners’ financial concerns on “Smart Money” Sean also interviews guests who are not part of NerdWallet and creates special segments to explore topics such as the racial gap in wealth and how to begin investing and the history for student loans.
Before Sean lead podcasting at NerdWallet He also covered issues concerning consumer debt. His writing has been featured in USA Today, The New York Times and other publications. When Sean isn’t writing about personal finance, Sean can be found digging around the garden, taking runs , and taking his dog on long walks. He is based within Ocean Shores, Washington.
Aug 18, 2021
Editor: Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, debt and money management 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 director of design and editing. Her previous experience included news and copy editing for several Southern California newspapers, including the Los Angeles Times. She received a bachelor’s degree in mass communication and journalism at The University of Iowa.
The majority or all of the products we feature are provided by our partners who pay us. This influences which products we review and where and how the product appears on a page. But, it doesn’t influence our evaluations. Our opinions are entirely our own. Here is a list of and .
Are you overwhelmed by your burden of debt? A debt management program could be the answer.
The debt payoff tool will put you on a path to pay off debts — typically from credit cards — over 3 to 5 years. With a DMP, several debts are combined into one monthly payment, and creditors lower the interest rate. In exchange, you agree to an installment plan that typically is between three and five years. Be aware that interest rate reductions are uniform across credit counseling agencies and are based on your creditor guidelines as well as your budget.
Here’s a comparison of the debt management plans at some major non-profit .
Agency / availability
In 50 States
A startup charge of $31 is included.
20 monthly fees
All states are covered, with the exception of Minnesota
$42 startup fee
A monthly payment of $30
The 50 States are represented as well as Puerto Rico
Start-up fee of $24
Monthly fee of $28
Available in 50 states
$35 startup fee
A monthly payment of $29 is available.
It is available in all 50 US states.
$35 for the initial fee
A monthly payment of $24 is charged.
Plans for managing debt: Pros and pros and
Could cut your interest rate by half or more.
It helps pay off debt quicker rather than making it your own.
Consolidates several debts into one installment.
It is mostly used intended for debts incurred through credit cards; is not suitable for student loans or medical debt, nor for tax obligations.
The plan lasts between three and five years and you’re typically unable to get 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 end your interest rate reductions.
It’s the time to pay off debt
Register to join the link and keep track of everything from credit cards to mortgages all in all one location.
Do you think a debt management program is right for you?
DMPs may not be suitable for all. According to the agency, just 10 percent to 20% of clients use this debt relief option. Of those who do, about 50% – 70% have completed the plan, depending on the time of year and how the agency tracks the completions.
It is possible to think about an DMP If:
Your unsecured debt, such as from credit cards, is between 15% and 39 percent of your earnings.
You earn a steady income and believe you could pay off your debt in five years if you had an interest rate that was lower.
You are able to get by without opening 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 bills typically aren’t covered by such plans. Other options:
If your debt problem is less than 15% of your annual income You can take the DIY approach using the or method.
A , if you’ve got adequate credit to be eligible, can also gather debts into one at the lower rate of interest. You can control how long the loan is and also have the option to open new credit lines.
You may want to consider this option could be a better option if your debt amounts to more than 40 percent of your annual income and you see no option to pay it off within five years. This debt relief tool can rapidly give you a new start, and consumers have credit scores that begin to rise in as short as six months.
What are the things you’ll need to do to do
If you believe that a DMP might be your best solution for debt relief begin by . Consider:
Certification and accreditation: Look for an agency which is an active member of the . They require that agencies be recognized by an independent body, and both require certification as well as an established standard of quality among counselors.
Access: Consider how you’d prefer to receive services: via phone, in person or online.
Cost: Fees vary by agency as well as the state you live in and the amount you need to pay. Before you sign up, make sure you know how much you’ll pay each month toward your debt and fees.
Author bios: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.
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