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What Is Best For Me? Debt Management Loan vs Debt Settlement


American consumers are carrying more debt than ever. In fact, a recent study shows non-mortgage debts (credit cards, medical bills, personal loans, etc.) are set to reach a record-setting $4 billion by the end of the year following steady annual increases since 2010. At the same time, plenty of those consumers have been seeking debt repayment solutions - programs that can help them streamline their payments so they can get rid of their crippling debts and start building a stronger financial future. Two of the most popular options for paying down debt are debt management and debt settlement. The key to getting the best results is to understand the differences between these two approaches so you can decide which option is better for helping you reach your goals. Both debt settlement and debt management can help consumers get “on top” of their debt, but there are some major differences between the two options.

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Pros and Cons of Debt Management

In a debt management program (sometimes called a DMP), a credit counselor works with your creditors to reduce interest rates and have penalties and excessive fees reduced or even removed. Then all your debts are combined into one balance, so all you have to think about is one monthly payment. You make that payment to your debt management company, and they use that payment to pay off all your creditors.


  • With a DMP, you have just one payment every month - a steady payment you can budget for and plan on.
  • You don’t deal directly with your creditors when you make your payments.
  • Since the debt management company makes payments on your behalf, you don’t have to worry about payments being late - and that means you don’t have to worry about late fees and penalties.
  • As you pay your debts down, your credit score may improve.


  • Although a DMP can result in reduced rates and fees, it doesn’t reduce your debt balance.
  • Some consumers may notice a small dip in their credit scores initially, but as they pay on time, that trend should reverse.


Pros and Cons of Debt Settlement

In a debt settlement plan (or DSP), one or more of your creditors agree to “write off” - that is, cancel - a portion of your balance. That may sound like a sweet deal, but there’s a pretty big tradeoff - debt settlement can impact your credit score.


  • With debt settlement, the balance of your debt will be reduced; the amount can vary significantly from one creditor to another.
  • A DSP might help you avoid bankruptcy, which is more harmful to your credit score.


  • Debt settlement impacts your credit score, and it can also make it more difficult to qualify for a loan or credit card in the future.

Debt settlement vs debt management: Which is better for you?

The answer to that question depends on you and your goals, but CareOne is here to help! Learn more about how a debt repayment plan can help you by contacting CareOne today at 1-888-888-CARE.

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