Are you feeling overwhelmed by your debt? Then, a debt management plan might be the solution. This debt payoff tool puts you on a path to pay off your debts — typically from credit cards — over three to five years. With a DMP, several debts are rolled into one monthly payment and creditors reduce your interest rate. 

In exchange, you agree to a payment plan that usually runs three to five years. Note that interest rate cuts are standardized across credit counseling agencies, based on your creditors’ guidelines and your budget.

6. Debt Management Plans

Debt management plans pros:

• Can cut your interest rate by half or more.
• It helps pay off debt faster than doing it yourself.
• Consolidates several debts into one payment.

Cons:

• Startup fees and monthly fees are common.
• It may take three to five years to repay your debt.

Debt management plans roll several debts into one monthly payment at a reduced interest rate. It works best for those who are struggling to pay off credit card debt but don’t qualify for other options because of a low credit score.

Unlike some credit card consolidation options, debt management plans don’t affect your credit score. However, if your debt is more than 40% of your income and can’t be repaid within five years, then bankruptcy may be a better option.

You can find a debt management plan through a nonprofit credit counseling agency.