Is a Debt Management Program a Good Idea?

In today’s fast-paced world, managing finances can sometimes feel overwhelming. If you’re struggling with mounting debt and finding it hard to keep up with payments, you might be considering a Debt Management Program. But is it the right solution for you?

Unfortunately, the debt relief industry—made up of companies that help consumers get out of debt—is plagued with misinformation and some business models that harm or confuse consumers. You have probably seen ads for some of these services and heard the promises of various companies and debt repayment methods. It can be disorienting, and it is not always easy to know who you can trust for your debt repayment needs.

That does not mean that every type of “debt relief” is bad, but instead it means that consumers must be aware of the important differences between different types of debt relief. Many experts agree that credit counseling is a safe and effective form of debt relief. You should only work with counselors from accredited, nonprofit organizations.

Under a debt management plan, a credit counselor negotiates with your creditors for you to create new payment plans. Your creditors may waive fees and lower the interest rate. But be aware that the debt management money takes some of what you’re paying and keeps it for their fee. Your ability to get credit is also very limited for a while, and some types of loans aren’t even eligible, such as auto loans and student loans. Consider your options carefully – you may be better off getting a home equity loan or consolidation loan from your credit union.