It’s not uncommon to have some amount of debt, but high fees and interest can make debt payments unaffordable. If you’re having trouble keeping up with your debt payments, there are several different ways to tackle overwhelming debt, including through a debt management plan (DMP).
A DMP is just one way you can gain control over debt. And one of the best debt management companies can help you build a plan to simplify your monthly payments, as well as save money on interest and accompanying fees.
In this guide:
- Best Debt Management Companies
- What Do Debt Management Companies Do?
- How Much Do Debt Management Companies Charge?
- Advantages to Debt Management Programs
- Disadvantages to Debt Management Programs
- Is a Debt Management Program Right for You?
Best Debt Management Companies
If you decide to seek help from a debt management company, it’s important to work with a reputable one. Here are some of the best debt management companies to consider.
Cambridge Credit Counseling
As with many other debt management companies, Cambridge Credit Counseling is a nonprofit debt relief company. When you sign up for this service, you work with a certified counselor. The company claims to provide an average reduction in credit card interest rates from 22% down to 8%, and an average debt repayment period of 48 months or less. Cambridge provides certain services for free, including credit counseling.
There are monthly fees with Cambridge, and there is a small setup fee. Cambridge is accredited, and the company has a reputation for transparency in the industry.
GreenPath Financial Wellness
GreenPath Financial Wellness has a long history in the debt management industry. This nonprofit has been providing services since 1961. It does provide some free services such as debt counseling. GreenPath is unique because it can work with people to create debt repayment plans for all types of debts, as opposed to just unsecured debt. GreenPath is also fully bonded, licensed, and registered in all 50 states, and it has an excellent Better Business Bureau rating. GreenPath fees are fairly similar to fees from other companies and monthly fees range from $0 – $75.
Apprisen is a company that has been providing services to help people improve their finances for more than 60 years. Financial wellness programs offered include free comprehensive financial counseling, personal finance education programs, financial coaching, and student loan counseling.
The team at Apprisen consists of Certified Financial Counselors, with certification through the National Foundation for Credit Counseling. Apprisen offers services in all 50 states. In five states, the company has local offices where people can go to meet with a Certified Financial Counselor.
There is no charge for the initial counseling session with Apprisen. However, other fees include:
- Opening Account Fee: Up to $45
- Monthly Fee: Up to $45
What Do Debt Management Companies Do?
Debt management companies don’t provide loans or funding of any kind. And the debt management plans that they offer are not the same as debt consolidation. Instead, a debt management plan allows a debt management company to pay your creditors on your behalf. You deposit money into a designated account, and then that money goes toward paying off your debts during a set period of time.
The primary role of a debt management company is to negotiate with your creditors for lower payments and interest rates. This is different from debt settlement because it doesn’t reduce the principal owed on a debt. Debt management typically can only be used if you have unsecured debt. In most cases, student loan debt isn’t eligible.
A debt management company can be advantageous for someone who feels like they have multiple payments each month that are difficult to keep up with. It can help streamline the payments into one and reduce interest and fees so that payment can be lower. When someone participates in a debt management plan, it can also stop creditors from continuously calling them.
How Much Do Debt Management Companies Charge?
Most debt management companies charge from $25 to $55 each month, and then there is also a setup fee charged in most states. With the best nonprofit debt management companies, the monthly fee shouldn’t be more than $75.
Advantages of Debt Management Programs
There are quite a few advantages and pros of a debt management program. Some of these benefits include:
- Simplifying the number of payments someone makes each month so that they don’t have to worry about late fees and missed payments.
- A payment schedule is designed to be affordable and to reduce interest and fees. Monthly payments are based on monthly household income versus expenditures.
- Similar to credit card consolidation, but a new loan isn’t required.
- Helping pay off debts faster.
- Stopping creditors from calling.
- May improve credit score over time.
Disadvantages of Debt Management Programs
While debt management programs and plans can be a great option for many people, they’re not a cure-all or a quick-fix for debt. First, the principal amount of debt a person owes isn’t reduced, even if their interest rates are.
Also, while there are many reputable and accredited companies, there are also scam organizations that advertise these types of service. It’s important to do research and ensure you’re working with a reputable company.
Prepare to pay a monthly fee for these services. While the fee may be fairly small, it is an additional expense to consider. It can take anywhere from 36 to 60 months to pay off debts using a DMP. While you’re enrolled, you may be limited from getting additional credit.
Something else to consider is the impact on your credit report. Eventually, it’s going to have a positive effect when you pay off debt. However, when accounts are closed while you participate, it can lower your credit score, at least temporarily.
Is a Debt Management Program Right for You?
Certain people might be better candidates than others to participate in a debt management plan. It’s best for someone who is financially overwhelmed with the amount of debt they have, particularly debt that is not tied to collateral. For example, someone who has a lot of credit card debt will probably be a better fit for a debt management program as opposed to someone who’s struggling with their mortgage payment.
A debt management program might work well for someone with multiple unsecured forms of debt because it can be easier to pay these off by making one monthly payment to the debt management company. A debt management program can be helpful when debt has a high-interest rate since one of the primary objectives with these types of plans is reducing interest rates.
If someone can’t live without the use of a credit card for a period of time — for example, if they often travel for work and use a personal credit card and then are reimbursed — they might not be a good fit for a debt management program. Most people who use a debt management program do see that their lines of credit are suspended. Consider all of these factors before enrolling in a debt management program or plan.