Debt Management FAQ
Everything you need to know about a debt management program, so you can make an informed decision.
If you’re struggling with credit card debt, the last thing you need is confusion over which debt solution is the right choice for you. But with so many options available, it can be hard to sort through all of the information to find what will work in your unique financial situation.
With that in mind, we’ve created this helpful FAQ about the program we offer – a debt management program. We’ve covered the basics, along with the most frequently asked questions we hear when people call us. This is designed to give you a total picture of what you can expect with a debt management program and how it will affect your finances.
If you still have questions or you’re ready to get started, call us at or take the first step now by completing an online request for a Debt & Budget Analysis.
Q: What is a debt management program?
A debt management program (DMP) is a debt relief solution for unsecured debt. It consolidates debts like your credit cards, unpaid medical bills and even some payday loans into one monthly payment at the lowest interest rate possible.
Q: What happens when I consolidate my debt with a DMP?
You only have to worry about making one payment each month. We process that payment and distribute it amongst your creditors.
- Your total monthly payments will be reduced by 30-50 percent, on average.
- Any interest rates applied to your debts will be reduced to around 11 percent or less, or eliminated completely in some cases.
- The program will stop added penalties and fees on your accounts.
- Most clients are out of debt in less than five years (60 payments or less).
Q: Are there any downsides to enrolling?
You should be aware that you won’t be able to use your credit cards while you’re enrolled in the program. Since you’re trying to eliminate your credit card debt, the last thing you need are more charges on your credit cards.
But since your monthly payments may go down, you’ll have an easier time learning to live without such a heavy reliance on credit. That way, even when you complete the program and can go back to using your cards if you want too, you’ll have the financial techniques you need to avoid debt problems in the future.
Q: What about my credit score?
In rare circumstances, you may see at least a slight impact on your credit score; this usually only happens if you have really excellent credit when you join the program (and if so, there may be other options you can use).
On the other hand, most people who enroll have already experienced at least some credit score damage because of their issues. Many clients with low credit scores have actually seen their credit improve during the program, because it helps you build a positive payment history.
Q: What are my other options besides a DMP?
If you have really great credit, you should consider options for do-it-yourself debt consolidation so you can avoid credit damage. You just need a high credit score to use these options – otherwise, you can actually make your problems with debt worse.
If you simply can’t afford to pay back everything you owe (which is what you do with a debt management program) then you should explore options for debt settlement. This is where you settle your debts for less than the full amount owed. However, be forewarned! This can damage your credit significantly for years to come.
If you can’t find any other option that will work for you, bankruptcy is the final solution you can use to get a fresh start.
Q: So how does debt management differ from debt settlement?
A debt management program pays back everything you owe. It just does it in a way that’s more manageable for your budget. By contrast, a debt settlement program will settle debt for less than you owe. Of course, there’s more of a credit penalty because you aren’t paying the creditors back everything that you borrowed.
Q: Are a debt management program and credit counseling the same thing?
Not exactly, although they are closely related. In credit counseling, a certified credit counselor evaluates your financial situation to help you find the best debt solution. In some cases, the best choice is a DMP. If so, the credit counselor can enroll you in the program. However, the credit counselor will only recommend this option if it’s the right choice. Otherwise, they’ll point you in the right direction so you can get the solution you need.