Answers to Your Questions About Debt Management

A debt management program can give you financial security if you use it right. Get your FAQs answered and learn the pros and cons of debt management.
A woman sits at her computer and rubs her temple while she considers debt management help
Written by:
Kenya McCullum
Edited by:
Kristin Marino verified

Debt management done right can help you sleep better at night and put you on the path to financial peace. But what is debt management, exactly, and how do you know if it’s right for you?

Get these answers and more to some of your most pressing debt management faqs.

Is Debt Management Worth It?

If your debt is overwhelming and you need help, debt management is worth it. It may be the answer to your problems because debt management services can make your payments easier to handle.

A service that helps you manage your debt can be a good option for those who have had their financial situations drastically change and they now find that they have trouble paying all of their debts.

Also, if you have multiple credit cards, medical bills, or personal loans, you can take advantage of these services to help get your financial situation under control.

For those who really need it, debt management services may be worth it for the peace of mind they can help you achieve.

If you have fallen behind on your payments and been getting calls from creditors, you know how stressful that can be. Debt management services are provided by credit counseling agencies that work directly with your creditors to find realistic solutions to your problems and help you create manageable payment options.

These organizations handle all of the negotiations with your creditors, so you don’t have to spend time making multiple calls that can lead to more stress and anxiety.

Rather than paying your creditors directly, you make payments to the credit counseling agency. You can discuss your questions and concerns with a debt counselor, which further streamlines the time you spend handling your debt and can help ease your money anxiety.

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What Are the Benefits of Debt Management?

First and foremost, services that help you manage debt can help you save time and money because you are making your payments directly to the credit counseling agency you work with, so you don’t have to pay multiple companies every month.

In addition, when a plan is created to manage your debt, you are generally able to lower your interest rates and eliminate any fees that your creditors were charging. Also, working with a credit counseling agency can help you pay off old debts faster.

What Are the Drawbacks?

Despite the benefits of debt management, it’s important to keep in mind that there may be some drawbacks.

When you begin a plan to manage your debt, you will be required to close all of your credit card accounts to ensure that you don’t add to your balances. Also, you will be advised to close accounts that are not included in the agreement. As a result, if you had rewards on your cards, you will lose all of them.

In addition, it’s important to keep in mind that not every creditor will be willing to participate in your debt management plan. Some companies may refuse, so you may still end up working directly with some of your credit card companies despite your debt management plan.

Also, if you have certain types of debt, like car loans, you may not be able to add them to your plan.

What Is the Difference Between Managing and Consolidating Debt?

Debt management and debt consolidation can both help you ease the burden of debt, but they do that in different ways.

While debt management is a payment plan you follow that is created after negotiations between a credit counseling agency and your creditors, debt consolidation is a loan where you put all of your debts together in one place.

Both options allow you to make one payment for all of your debts and you can often save money because you will generally have a lower interest rate than before. In addition, they both can make your debts more manageable to handle and help you avoid bankruptcy.

Debt management programs do not require a credit check in order to be approved.

On the other hand, with debt consolidation loans, there may be a credit check involved because some banks require that people who take out these loans have a high score.

However, those who have had their credit scores negatively affected by late payments can still get some relief. Some lenders do offer loans specifically to people with bad credit, but that may mean you are expected to pay a higher interest rate.