A debt management plan can be a good option if you can’t afford your debt payments but want to be debt-free in three to five years. This can be a good option for those who have balances on multiple credit cards, several personal loans, and other unsecured debts

If you’re finding it difficult to make payments each month while paying your regular bills, we recommend seeking professional help. Read on to learn more about what debt management plans are, how they work, how to enroll, and the pros and cons.

What Is a Debt Management Plan?

A debt management plan (DMP) is a guided program that helps borrowers manage their debts efficiently.

These plans are offered primarily by nonprofit credit counseling agencies and usually include advice and assistance on using consumer credit and debt management. The plan's purpose is to help provide relief in interest rates and enable borrowers to pay off their debts within five years.

A DMP usually starts with a credit counseling session to determine your budget and financial situation. Once you enroll in the plan, a credit counselor will negotiate with your lenders to reduce interest rates and waive late fees.

How Do Debt Management Plans Work?

You can only enroll unsecured debts like payday loans, credit cards, and personal loans in a debt management plan. Here’s an in-depth look at how a DMP works:

  • You’ll start by contacting a credit counseling agency to set up an appointment.
  • A certified credit counselor will take a look at your budget, credit utilization, and other financials and provide credit counseling.
  • If you need a DMP, your credit counselor will enroll you in the plan.
  • They’ll contact your lenders and negotiate with them to set up a new repayment plan with a lower interest rate.
  • You’ll make a single payment each month to the credit counseling agency, which they’ll distribute to your lenders.
  • You’ll continue making DMP payments until your plan is fully paid off.

Here’s an example to help you better understand how a DMP works. Let’s say that due to a reduction in your work hours, you’ve had to rely on credit cards and payday loans to make ends meet. 

You owe $8,000 in credit card debt at an APR of 25%. You’re only able to pay $300 a month on your cards. At this rate, it can take you 40 months to pay off the debt, and you’ll pay a total of $3,799 in interest charges. 

The debt has lowered your credit score, and you’ve been looking for no-credit-check apartments for rent but are unable to find something in your budget because the high debt payments are taking away a big part of your income.

You get in touch with a credit counselor and enroll in a DMP. Your credit counselor is able to negotiate a lower interest rate of 10%. With this new plan, you can make a payment of $300 for 31 months to pay off the debt and save $2,714 in interest charges.

Pros and Cons of Debt Management Plans

While a debt management plan is an effective way to pay off debts, it’s not for everyone. We recommend weighing these pros and cons to determine if it’s right for you.


  • A debt management plan can help you get out of debt faster, usually in three to five years.
  • You’ll be able to make a single payment each month.
  • Your credit counselor may be able to negotiate a lower interest rate, which can lower your monthly payments by 30%-50%.
  • You’ll receive financial education from certified professionals.
  • You’ll receive access to resources and tools to help improve your money management skills.


  • You’ll have to close your existing credit accounts when you enroll in a debt management plan.
  • You usually won’t be allowed to open any new credit lines while in the program.
  • A debt management plan will be listed on your credit report, which may be viewed as a red flag by lenders.
  • Not all lenders will agree to participate in the debt management program.

Is a Debt Management Plan Right for You?

Here are a few situations where enrolling in a debt management plan may be right:

  • You have a lot of unsecured debt, such as personal loans and credit cards.
  • You have debt at high interest rates.
  • You have a regular source of income and the ability to make payments.
  • You want to reduce the interest rates on your credit cards.
  • You want to combine multiple debts into a single payment to pay it off sooner.
  • You have bad credit due to late fees and missed payments and are receiving collection calls.
  • You’re willing to close your credit cards while enrolled in the program.

Top 3 Debt Management Plans in 2024

If you’re thinking about enrolling in a debt management plan, consider our top three recommendations. We reviewed 15 debt management companies and selected our top three recommendations based on these factors:

  • Geographic availability
  • Customer reviews
  • Services provided
  • Fees
  • History
  • Industry reputation  
American Consumer Credit CounselingMoney Management InternationalCredit.org
Fees$39 enrollment fee and $7-$70 monthly fee$33 enrollment fee and $25 monthly feeUp to $50 enrollment fee and up to $75 monthly fee
BBB RatingA+A+A+
AvailabilityAll 50 states and Washington D.C.All states and territoriesAll 50 states and Washington D.C.

How To Enroll in a Debt Management Plan

Here’s a step-by-step guide on how to enroll in a debt management plan:

  1. Review the list of approved credit counseling agencies in your area provided by the U.S. Department of Justice.
  2. Choose a credit counseling agency that’s accredited by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America.
  3. Contact the credit counseling you want to work with and set up an appointment.
  4. At your first credit counseling session, your counselor will review your financial information. Bring your bank account statements, credit card statements, and details about all your debts.
  5. Your counselor will let you know if you should enroll in a debt management plan.
  6. Sign the documents to enroll in the DMP once you’ve determined a budget to pay off debt and a new repayment plan is established.

Making an Informed Decision about Debt Management Plans

Debt management plans can provide debt relief from credit card debt and unsecured loans without the need to take out a new loan. However, it’s not always the right solution for everyone. Whether a DMP is right for you will depend on the type of debt you have, how much you owe, your credit score, and your income.

Weigh the pros and cons, consider alternatives like debt settlement, balance transfer, and debt consolidation loans, and speak to a credit counselor to determine whether a DMP is right for you.