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When you cannot cope up with multiple bill payments, debt consolidation or debt management can help you out of the stressful situation and bring your finances back in order. Depending upon your situation, you need to decide whether debt consolidation or debt management (DMP) will be the right solution to your payment problems.

Debt consolidation vs debt management - How do they differ?

In order to decide upon debt consolidation vs debt management, try exploring how each option can work in your favor. Given below is a brief idea on consolidation and debt management plan.


Debt consolidation: Debt consolidation is a way by which you can consolidate several bills into one monthly payment which is easily manageable. It relieves you from the stress of managing several payments and dealing with different creditors. There are 2 ways to consolidate bills - getting enrolled in a debt consolidation program and taking out a debt consolidation loan. You should choose the one that can best resolve your problem.


Debt management: Debt management plan (DMP) works almost in a similar way as a consolidation program, the only difference being that a DMP is mostly offered by credit counseling agencies. However, a DMP differs from a consolidation loan. Unlike a consolidation loan, a DMP works in the following way.


  • Negotiation to cut down rates: Credit counseling agencies negotiate with your creditors (or collection agency) to let you make payments at low rates of interest. This reduces your burden and saves you thousands of dollars.
  • Reduction/elimination of late fees: With a DMP, you can have your late fees (or over-the-limit charges) reduced or eliminated. The purpose is to bring your account current and relieve you from the stress of handling collection calls. For further details, check out the information on debt management plan.
  • Replacing multiple bills with a single payment: The credit counseling agency withdraws only one affordable payment from your bank account and disburses it amongst several creditors. As you pay off your creditors, and get rid of some accounts, you'll find it easier to make higher payments towards other accounts.

Debt consolidation vs debt management - Which should you choose?

When you seek professional help from a debt relief company, they will arrange for a free debt counseling session to review your income and bills based on which they'll help you decide upon debt consolidation vs debt management. Alternatively, you can compare the monthly bills payable under each program. Check out the fees required in each program and the time period after which you can clear your dues. For instance, a consolidation loan is available for an extended time period. So, even though you get rid of unpaid bills through a lump sum payment, it'll take quite long to repay the consolidation loan and get out of debt completely.


With a DMP, you don't need to open a new debt account as in a consolidation loan. You actually deal with your existing bills and make payments at low rates of interest. As such, a DMP makes you debt free in much less time compared to a consolidation loan.




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