Sense & Centsibility Blog
Letters DMP and text saying Debt Management Plans

Debt management plans [pros and cons]

In my work as a financial counselor, I sometimes meet with individuals who are having challenges managing credit card and other unsecured debt. In a previous blog, I discussed the differences between two solutions for managing debt: Debt Management Plans (DMPs) and debt consolidation loans. In this blog, I’ll go into more detail about the pros and cons of Debt Management Plans.

The pros of Debt Management Plans

  • Your unsecured debts, such as credit cards or some loans, are simplified or “consolidated” into one monthly payment. This is an easier way of paying down your debt, taking away the hassle of multiple payments.
  • A DMP typically lowers your interest rates, and the rates are fixed for the entire time of the plan.
  • If your interest rates are reduced and you make on-time payments, you will pay off your debts in five years or less, which can save you thousands of dollars.
  • DMPs stop late fees.
  • There is no minimum credit score qualification.
  • There is no penalty for paying off the debt early. 

The cons of Debt Management Plans

  • Creditors require the accounts to be closed in order to be put on a DMP. This can slightly lower your credit score, because closing multiple accounts at the same time affects the length of your credit history. However, that score will increase with on-time payments and because the debt is paid down faster on the DMP.
  • There is a small monthly service fee, but typically your monthly debt payment (which includes the fee) is reduced along with interest rates. The reduced monthly payment and interest rates more than offset the service fee.
  • Participation in a DMP is dependent on the creditor; there is a possibility that not all of your creditors will participate.

We offer nonprofit Debt Management Plans as one solution for managing and eliminating your debt and achieving financial wellness.

Our experienced, certified financial counselors can discuss whether a DMP is a good solution for your particular situation. Call 888.577.2227 for a free and confidential appointment, or get all your support online. We are here to assist you!

Joanne Lundberg


Author Joanne Lundberg is a certified financial counselor with LSS Financial Counseling.