Debt Management vs Debt Settlement

Understanding key differences between two debt relief options.

One of the most common misconceptions about a debt management program is that it’s the same as a debt settlement program, that those are two terms that refer to the same type of program. In fact, the programs are significantly different. They have two different end goals and offer two sizably different ways out of debt.

With that in mind, we’ve created the table below to help you understand how the two programs differ and what exactly they’re designed to do. If you still have questions or need help determining the best path out of debt in your unique financial situation, we can help. Call Consolidated Credit today at or complete an online application to request a confidential debt and budget analysis from a certified credit counselor at no charge.

Comparing two debt relief programs

Debt Management Program Debt Settlement Program
Will this help me pay back everything I owe? Yes. The program is designed to pay back everything you borrowed – you just do it in a way that’s easier on your budget at reduced interest rates. No. You settle your debt for less than the full amount owed by making a settlement offer for percentage of what you owe in order to erase the remaining balance.
Does this help me make monthly payments to my creditors? Yes. You make one payment to a credit counseling agency each month, then the payment is distributed among your creditors on a negotiated schedule. No. Instead the money you would use to make monthly payments to your creditors is diverted into an account to generate the funds necessary for your settlement offer.
Will this stop future penalties from being applied to my debts? Yes. Once the creditor agrees to the adjusted payment schedule, all future penalties are stopped because you’re making payments as agreed unless you don’t make payments and fail to complete the program. No. Late fees and penalties may still be assessed on the accounts since you won’t be making payments. However, since you’re settling for less than you owe anyway, the impact of such penalties is reduced.
What happens to my interest rates? They’re reduced or eliminated. The credit counseling agency calls each creditor to negotiate interest rate reduction; rates are typically reduced to 0-11%. Interest charges are typically stopped already. Most settlement offers are made to a debt collector, meaning the original credit card account was already charged off and sold to a collector. Debts in collections do not accrue interest. If you are settling an open credit line, interest charges would be applied until you make the offer and close the account.
How are fees assessed on the program? Based on budget; set by federal/state regulations. There is a setup and monthly maintenance fee assessed that’s based on your budget and what you can afford. Fees are also set and capped by state regulations. Fees never exceed $69. Fees are only assessed once a debt is settled. By law the settlement company cannot collect fees until they have settled at least one debt on your behalf; fees are based on the debt owed and the number of settlements reached.
What happens to my credit? Neutral or positive credit impact. As long as you keep up with program payments, the program will not have a negative impact on your credit. In fact, since you build a positive credit history and reduce your total debt, people often see their credit improve as a result of completing the program. Negative credit impact. Each account that is settled with leave a negative item on your credit report for settling the debt for less than what was owed; the remark remains in place for seven years from the date of the final account settlement. This is likely to make lenders consider you a high risk borrower.

"We are really proud to recommend Consolidated Credit" Kathleen Cannon, President & CEO of United Way of Broward County. Consolidated Credit Counseling Services, Inc. is pleased to announce our partnership with the United Way as a United Way Chairman’s Circle Organization.

"We are really proud to recommend Consolidated Credit" Kathleen Cannon, President & CEO of United Way of Broward County. Consolidated Credit Counseling Services, Inc. is pleased to announce our partnership with the United Way as a United Way Chairman’s Circle Organization.

All Consolidated Credit counselors are certified personal financial counselors (CFC) We've helped 5 million people get out of debt! Call us today and see what we can do for you.

Consolidated Credit is honored to receive the 2012 Excellence in Financial Literacy Education (EIFLE) Nonprofit Organization of the Year award. The EIFLE awards acknowledge innovation, dedication and the commitment of organizations that support financial literacy education worldwide. See what Consolidated Credit can do for you.

Consolidated Credit is honored to receive the 2012 Excellence in Financial Literacy Education (EIFLE) Nonprofit Organization of the Year award. The EIFLE awards acknowledge innovation, dedication and the commitment of organizations that support financial literacy education worldwide. See what Consolidated Credit can do for you.

The National Industry Standards for Homeownership Education and Counseling are a set of guidelines for quality homeownership and counseling services. Industry professionals who adopt these standards can be trusted to provide consistent, high quality advice.
Click here to learn more.

Consolidated Credit Consulting Services, Inc. has been verified as the owner or operator of the Web site located at www.consolidatedcredit.org. Official records confirm Consolidated Credit Consulting Services, Inc. as a valid business. Call us today and see what we can do for you.

Consolidated Credit is a Certified ISO 9001 company, as verified through Bureau Veritas Certification.

Time tested and customer trusted. Consolidated Credit Counseling Services has been a BBB Accredited Business since 1998 and has a current A+ rating. Call us today and see what we can do for you.

View the Consolidatedcredit.org review status

Time tested and customer trusted. Consolidated Credit Counseling Services has been a BBB Accredited Business since 1998 and has a current A+ rating. Call us today and see what we can do for you.

View the Consolidatedcredit.org review status

Consolidated Credit is proud to be an ANAB accredited member. Accreditation by a recognized and respected body such as ANAB ensures the impartiality and competence of our company. To see what we can do for you, give us a call.

U.S. Department of Housing and Urban Development - HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. Consolidated Credit is proud to be a member of HUD and also part of the Hope Now Alliance.

You can save!

With this amount of debt, you'd pay around $xx.xx on a DMP.

FREE Debt Consultation