You may know how to get out of debt in theory. But doing it is easier said than done.
There are many effective strategies—from debt consolidation to side gigs to the snowball and avalanche methods of repayment. But sometimes these things aren’t enough. If you see little-to-no light at the end of the tunnel, it might be appropriate to seek professional help. Agencies that offer debt management plans and debt relief programs are created specifically for your situation. But which is best for you?
Let’s look at debt management plans vs. debt relief programs to help you decide.
What is a debt management plan?
A debt management plan (DMP) is a way to combine your unsecured debts into a more manageable single monthly bill. You’ll typically get reduced interest rates compared to what you’re currently paying thanks to negotiation by the agency you’re working with. This is a great option for those who aren’t woefully behind on payments and simply need a path to paying off monthly payments that are becoming unsustainable.
A debt management plan generally requires that you talk over your situation with someone from a nonprofit credit counseling organization (for-profit counseling agencies exist, as well, but try to steer clear of them). If a DMP sounds right for you, they’ll help you get set up. To help ensure you’re connecting with a legitimate counselor, you can check that they’re affiliated with the Financial Counseling Association of America or the National Foundation for Credit Counseling.
A DMP can be one of the best ways to get on track to repay your outstanding balances without tanking your credit score. Enrolling won’t itself do anything to your credit. That said, you’ll likely be required to cancel all credit cards which you’re using the DMP to help repay—which can hurt your credit. Your credit utilization may increase, and your length of credit history will decrease. These factors make up 45% of your overall credit score.
Pros and Cons of Debt Management Plans
Pros
- DMPs do not automatically hurt your credit
- Multiple debts can be rolled into one, often with a lower interest rate
- Predictable payoff schedule
Cons
- Accounts rolled into a DMP are closed
- May take longer to get out of debt than a debt relief program
- Those already deeply delinquent may not benefit greatly from the credit-preserving aspects of a DMP
What is debt relief?
Similar to a DMP, debt relief—and specifically, debt settlement—is a service that can provide you a path to becoming debt free. It’s considerably more extreme than a DMP, however, and comes with negatives that must be carefully weighed.
Debt relief programs aim to settle your debt through negotiations. It doesn’t just roll your debts into a new loan; it pitches to your creditors a repayment amount that is much less than you owe. Such programs gain leverage by asking you to stop paying on your loans and letting them fall into delinquency, and instead deposit money into a dedicated account set up for the program.
Doing this can send your credit score into a freefall and result in stressful calls from collections agencies if your original creditors sell off the debt. It can even result in lawsuits. And we should note, it’s not guaranteed to work, as it relies on your creditors accepting an offer of less than what you owe. But the idea is that it gives the debt relief company more bargaining power.
Once the debt relief company and your creditors have made an agreement (if they reach an agreement), the money you pay into the debt relief company’s account each month will be used to pay your creditors. Debt relief companies are for-profit, and they tend to charge you a flat percentage of the amount of debt they’ve settled for you. For example, you would owe about $4,200 to a company that charges a 21% fee for settling $20,000 of your debts.
When is bankruptcy on the table?
It’s worth noting that bankruptcy is also a form of debt relief—but it should be an absolute last resort. It’s designed to forgive much of your unsecured debt (think many personal loans, credit cards, medical bills, etc.). You’ll still owe things like tax debts and student loans, but it can be a huge relief to your finances.
One major downside is that the black mark will follow you for up to 10 years on your credit report. Bankruptcy will also tank your credit score and even result in lost assets, from personal property to home equity.
Pros and Cons of Debt Relief Programs
Pros
- Typically a faster way to get out of debt
- Reduces the amount of debt you owe
- Often smaller monthly payments than a DMP
Cons
- Devastating impact on your credit score
- May result in aggressive calls from collections (and even lawsuits)
- Fees to settle are often much higher than what you’ll pay for a DMP
Debt management plan vs. debt relief: Key differences
As you can see, a DMP and a debt relief program have many differences, though their ideal outcomes both involve eliminating your outstanding balances. Here’s a side-by-side comparison of each.
Which approach fits your situation best?
Now that the differences are clear between these two options, which is right for you? Ask yourself the following questions to find out.
Are you still making monthly payments?
If your accounts are still in good standing, a debt management plan is often the best option. A DMP will generally keep your credit intact, and you’ll be able to rightfully repay all that you owe and remain on good terms with your creditors. If you’re deep into delinquency already, you may not have much to lose by using a debt relief program.
Is debt relief worth the damage to your credit score?
If your income would be no match even for the monthly payments that result from reduced APR and a single monthly payment via a DMP, you may decide to accept the credit hit that comes with a debt relief program (or even bankruptcy in the severest cases).
How much debt do you have?
Many debt relief programs require that you have a specific amount of debt to qualify (often $7,500+). If you’ve got less than that, debt relief may not even be an option. Better to explore a DMP, instead.
How much can you afford to pay each month?
If you’ve got the ability to continue making meaningful monthly payments for several years, a DMP may be your best option. Debt relief programs tend to have lower required monthly payments, as they work to settle a lot of your debt. If you’re looking for the absolute lowest monthly burden, that’s the way to go (though, again, it comes with devastating impact to your credit).
How to start a debt management plan or debt relief program
Whether you’re interested in a DMP or debt relief, the process is largely similar.
For a DMP:
- Tally up your total debts and essential monthly expenses.
- Reach out to a nonprofit credit counselor, ideally one that’s affiliated with the NFCC or FCAA (this consultation is usually free).
- Work with the counselor to agree on a single monthly payment that you can afford.
- Formally enroll. The agency will then pay your creditors as you pay them.
For a debt relief program:
- Tally up your total debts and essential monthly expenses.
- Ensure you’re eligible for debt relief based on the amount of money you owe.
- Compare debt relief companies to find the most well-reviewed, customer-friendly options (some that are out there may be a downright scam).
- Formally enroll. You’ll then be asked to lower or completely stop your payments to your creditors and begin making payments to the debt relief program.
Stay away from debt relief companies that charge fees before any debt is settled (in fact, this may be illegal) and any that are not transparent about the costs. To ensure you’re not taken advantage of by a sleazy debt relief program, take a look at our list of best debt relief companies for trusted options.
Alternatives to Debt Management Plans and Debt Relief
Debt management plans and debt relief programs aren’t the only way to get out of debt. If you’re still above water with a good credit score and you just wish you could get a break on APR and lower your monthly fees, you may consider:
Balance transfer card
Some credit cards offer a 0% intro APR for up to 21 months on balance transfers before the regular rate kicks in. Relocating your high-interest debt to one of these cards can help you to knock down what you owe in a hurry, as every dollar you put toward the balance will go toward the principal.
Just note that you’ll only be able to transfer as much debt as your credit limit can hold (including the balance transfer fee, often around 5% of the transferred amount). Also, these cards typically require a good-to-excellent credit score to qualify.
Debt consolidation loan
A debt consolidation loan is an installment loan that typically comes with lower APR than credit cards. You can use this personal loan to pay off credit card debt and receive a single manageable monthly payment. This can also increase your credit score in time, as installment loans don’t count toward your credit utilization.
See our picks for the best debt relief companies of April 2026
The takeaway
Even with seemingly insurmountable debts, there exist programs to help you get through it. A debt management plan can offer lower interest rates and a reasonable monthly payment while preserving your credit score. If your accounts are currently delinquent, or if you can’t afford the monthly payment of a DMP, a debt relief program will work to settle your debt for less than you owe—potentially giving you an even more reasonable monthly obligation.
Frequently Asked Questions
What types of debt qualify for a DMP?
Unsecured debts such as credit cards and personal loans qualify for a DMP. Things like auto loans and mortgages do not.
Does a debt management plan hurt your credit score?
Enrolling in a debt management plan doesn’t hurt your credit score. The result may ding your credit score slightly, however. Credit utilization, which accounts for 30% of your overall score, may increase as enrolled accounts are required to be canceled. This will also cause your average length of account history to drop.
Does debt relief ruin your credit?
Debt relief doesn’t “ruin” your credit forever, but it certainly scars it for a long time. Things like missed payments and charge-offs will stick to your credit report for seven years.
How long does a debt management plan take?
Debt management plans are often designed to be completed within three to five years.
What are the fees for a DMP vs. debt relief?
A DMP charges fees for account setup, as well as modest monthly fees. A debt relief program often costs thousands of dollars, as it charges a large percentage of settled debt as its fee.
