An increase in the total amount of debt in the U.S. rose by $27 billion to almost $16 trillion in the first quarter of 2022, according to the Federal Reserve Bank of New York. In the same quarter, credit card debt rose by $61 billion to $986 billion. If you’re one of the millions of people in debt and are trying to get out of it, you might be wondering whether you should try a debt settlement program or a debt management plan.
What to Know About Debt Settlement vs. Debt Management
Opting for debt settlement is a bit like a game of chance. While you could ultimately pay less than you owe, you also could end up owing more. Here are some cons to watch out for:
Debt Settlement Cons
- You’ll incur penalties and fines
- Bad for your credit and stays on your credit score for seven years
- Creditors may decide not to settle
- Debt settlement companies charge high fees (15%–20% of settled debt)
- Creditors could choose to file a debt collection lawsuit
- Settlement can take years
- Forgiven debt over $600 is taxable
- Most secured debt (auto loans, mortgages) cannot be settled
A debt management program provides a more stable alternative if you’re looking for assistance to get out of debt. Here are a few of the pros of a debt management program:
Debt Management Pros
- Lower interest rates on debt
- Combined, affordable monthly payments
- Loans paid off in 3–5 years
- Little to no fees
- Counselors provide budgeting help and financial skill building
Debt Repayment Bottom Line
If you’re struggling with your debt, asking for help is the first step. But choose wisely when deciding which direction to go. While a debt settlement program may seem attractive, the risks are high and the potential payoffs are murky.
Debt Management Plan: Enroll Today!
One monthly payment | lower interest rates | no more debt collector calls | improved credit score