Debt Management Programs: Pros and Cons

When deciding to go debt-free, it’s important to consider debt management programs pros and cons as you determine whether this option will work for you and your situation.

The “right” debt solution varies from person to person, as each individual’s financial situation and debt situation is unique. By examining the various debt management plan pros and cons, you can effectively determine whether this option is right for you and your financial situation.

What is a Debt Management Program?

debt management programs pros and cons

Weigh Your Debt Management Options Carefully

Debt management programs are run by non-profit organizations and for-profit groups alike. All debt management programs have one primary objective in mind: to guide you toward a debt-free life by enabling you to systematically pay off debts.

The program’s debt elimination experts will devise a plan that will enable you to get your debts paid off in the fastest and most efficient manner. The faster you pay off your debts, the less you’ll pay in interest. In addition, the program’s specialists will decide which debts to pay off more aggressively in order to maximize savings.

Consider the following debt management programs pros and cons to determine if this option is right for you.

Pro: An Improved Ability to Get Credit Card Interest Rates Lowered

Debt management programs are known for their ability to get your debtors to lower credit card interest rates, which means a lower monthly payment and a faster pay-off. Their experienced negotiators work with credit card companies on a regular basis, so they often have a bit of favor with the creditors.

Plus the negotiators know precisely what to say in order to get those interest rates slashed. This makes debt management programs a good solution for individuals who wish to get their sky-high credit card interest rates cut down to a more manageable number.

Lower interest rates are an important aspect of eliminating debt quickly and effectively.

Con: Debtors Pay a Fee to the Debt Management Program

Debt management programs do charge a fee. So this is an important consideration.

Debtors who are disciplined, well-organized, and have a good understanding of how to pay off debts in an effective manner (e.g., starting with the most high-interest debts and paying these off more aggressively, one by one) may find that they can manage their finances by developing their own debt management plan.

So for some individuals, the extra fee that’s charged by the program may not be justified, making this point a definite debt management program “con.”

But in many cases, the debt management program experts can get your interest rates slashed — something that may not be possible to achieve independently. So even with the fee, the savings may make the program worthwhile for those who have high credit card interest rates. Whatever your situation, this is one of the most important debt management plans pros and cons to consider.

Pro: Improve Your Damaged Credit Rating

Debt management programs can actually help to improve your damaged credit rating, since you’ll be making regular payments month after month. So this makes this debt solution a good one for individuals who do not want to obliterate their credit with a personal bankruptcy.

Con: Debt Collectors Will Keep Calling

When considering debt management plans pros and cons, it’s important to remember that the debt collectors will keep calling. And since most debts take months or years to pay off, this may mean dealing with debt collector calls for quite a long time.

Conversely, when an individual pursues bankruptcy, creditors are legally prohibited from contacting the debtor.

Pro: Debt Management Plans are Convenient

Many debtors enjoy the convenience of debt management plans.

Rather than making payments to multiple credit card companies and other debts each month, the debtor makes a single large payment to the debt management program, which then disburses the funds to the individual’s creditors. This makes the debt pay off process easier and more worry-free, while also ensuring that all of your creditors receive timely payments each month.

Some find this preferable and many individuals find they’re more disciplined when their payments are managed through a debt management plan.

Con: Will You Meet the Program’s Eligibility Requirements?

As you mull through the various debt management programs pros and cons, remember that some programs have some fairly stringent eligibility requirements. Many programs require you to owe a minimum of $10,000.

So it’s important to explore the various programs and to determine whether you’re even eligible to participate. Some debt management programs will accept individuals who owe smaller amounts of debt, but you may be faced with a much higher fee.

Pro: Access to Financial Advice from Professionals

When you enroll in a debt management program, you will receive access to financial planning and debt management experts who can provide you with advice, recommendations and tips.

For many, the access to advice from financial experts is invaluable. The experts can equip you with the knowledge you need to get debt free and stay that way! Conversely, individuals who go it alone may ultimately repeat their mistakes or make other errors that can damage their credit or result in further financial woes and difficulties.

Also remember that many debts, like alimony and child support, cannot be negotiated, nor “paid off,” and therefore, they’re not eligible for inclusion in a debt management plan.

There are many debt management plans pros and cons to consider! Ultimately, only you can decide which option is best for you, your family and your financial situation.