If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (also known as a DMP). A debt management program is designed to get you out of debt more quickly than you could on your own. Typically, these programs lower your interest rate and monthly payment, so more of your payment goes toward reducing your debt. Debt Management Programs are administered by organizations called credit counseling agencies (also known as a CCA).

A debt management program alone is not credit counseling, and debt management programs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a debt management program is appropriate for you, a reputable credit counseling organization still can help you create a budget and teach you money management skills.

In a debt management program, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees, but check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. A successful debt management program requires you to make regular, timely payments, and could take 48 months or more to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You may have to agree not to apply for, or use any additional credit while you're participating in the debt management plan.

There are some credit counseling scams that take advantage of consumers that are looking for debt help. Consumers should be wary of credit counseling organizations that:

• Charge high upfront or monthly fees for enrolling in credit counseling or a debt management program.
• Pressure you to make "voluntary contributions," another name for fees.
• Won't send you free information about the services they provide without requiring you to provide personal financial information, such as credit card account numbers, and balances.
• Try to enroll you in a debt management program without spending time reviewing your financial situation.
• Offer to enroll you in a debt management program without teaching you budgeting and money management skills.
• Demand that you make payments into a debt management program before your creditors have accepted you into the program.

Advantages of a Debt Management Program:

• A debt management program can drastically reduce the high rates of interest typically charged by most creditors. They also eliminate late fees, so more of your money goes toward reducing your debt.
• A debt managment program can help get you out of debt more quickly than you could on your own. Also a debt management program is not a loan.
• Besides putting an end to harassing calls from collectors, the right provider can guide you through a difficult time and help you plan a brighter financial future.

Disadvantages of a Debt Management Program:

• Only unsecured debts are usually considered for a debt management program.
• You may have to agree not to apply for, or use ANY additional credit while you're participating in the debt management plan. (which is a good thing for people with a lot of unsecured debt)

A debt management program is not a loan and it is not bankruptcy, which could have long-term negative effects on your credit report. Debt consolidation programs are viewed as positive by banks and creditors. By engaging in a debt management program, your creditors realize you are making a good faith effort to repay your debts. Most generally creditors are willing to work with debt consolidators to reduce your payments and in turn, your debt. Pay off your debt quicker and easier than you ever thought possible with a debt consolidation loan.