# How to choose between a debt management plan and a debt consolidation loan By [Corey Buhay](/content/blog/author-page/corey-buhay/index.html) **|** Published on November 21, 2025 ) ### TL;DR - The right debt management strategy can help payoff feel sustainable over the long run—and can help you get out of debt - Debt management plans are usually available through nonprofit credit counseling agencies. They tend to involve more structure and accountability - Debt consolidation loans are available from private lenders like banks, credit unions, and online lenders. They tend to be more flexible and some are fee-free. - You’ll need good credit to qualify for a consolidation loan. If you’re ready to take a structured approach to debt management, you’ll quickly come up against two similar-sounding options: debt management plans and [debt consolidation loans](/content/personal-loans/debt-consolidation/index.html). Both are common tools for [debt control](/content/blog/what-is-debt-consolidation/index.html), and both share the same goal: helping you take control of your debt and pay it off. However, they take dramatically different approaches. Choosing the right one is critical if you want to settle on a strategy that actually feels sustainable over the long run. Here’s how to decide which debt management path may be right for you. ## What is a debt management plan? A [debt management plan](https://www.nfcc.org/resources/debt-management-plans/) is a method of debt payoff that typically involves working with a nonprofit credit counseling agency. A credit counselor will sit down with you, discuss your debts, and come up with a strategy for paying them off. In most cases, your counselor will put you on a monthly payment plan. You’ll make a single lump-sum payment to the agency each month. They’ll then distribute those funds among your creditors. A debt management plan [usually takes 3 to 5 years](https://www.ncoa.org/article/what-is-a-debt-management-plan/) to complete. Sometimes, the agency will be able to work with your creditors to negotiate lower rates. The other benefit of a debt management plan is that you can typically qualify for one no matter what your credit score is. However, you’ll most likely have to pay a small monthly fee for the service, and you [won’t be able to use your credit cards](https://credit.org/financial-blogs/how-a-debt-management-plan-affects-your-credit-pros-and-cons) or other credit accounts while you’re enrolled in the plan. In fact, most credit counseling agencies will have you close your existing credit accounts and will block you from opening new ones while you’re on your management plan. This can result in a [drop to your credit score](/content/blog/how-to-cancel-a-credit-card/index.html)—but it will prevent you from incurring more debt during this time. ## What is a debt consolidation loan? A [debt consolidation loan](/content/blog/what-is-debt-consolidation/index.html) is a tool for combining multiple debts into a single monthly bill. First, you find a private lender—like a bank, credit union, or other financial institution—that’s willing to pay off all your current debts. Once that’s done, the new lender will replace those debts with a single new loan with new terms. You’ll then pay that new loan off over time. Debt consolidation is a popular way to streamline your payments and [simplify debt pay-off](/content/blog/refinance-credit-card-debt/index.html). Though some lenders—like Earnest—don’t charge origination fees, many lenders do. And like any new loan, applying for a debt consolidation loan will result in a [hard credit inquiry](/content/blog/soft-vs-hard-credit-inquiries/index.html), and therefore a ding to your score. That said, you may be able to qualify for a lower interest rate on your new loan if you have decent credit, and that can help you save over time. The other benefit of [debt consolidation](/content/blog/what-is-debt-consolidation/index.html) is that it doesn’t block you from using your existing lines of credit or opening new ones. If you want to put something on a credit card while you’re paying off your debt consolidation loan, you can do so without penalty. That offers more independence than you might enjoy under a debt management plan. ## Debt management vs. consolidation: A side-by-side comparison Both of these [debt relief methods](https://www.nfcc.org/blog/debt-relief-programs-the-pros-and-cons-of-each-type/) can simplify your bills and help you take control of your finances. However, each one comes with its own distinct features. ## How to choose between debt management and consolidation Debt management plans and consolidation loans can both be great options if you’re craving a little more structure around your debt payoff strategy. However, the right solution for you will depend on your budget, debt amount, and desire for accountability. ### A debt management plan might be better if you… - Want the accountability and discipline of an externally provided plan - Don’t mind working alongside a third party - Prefer the lowest rates possible - Want the benefit of credit counseling - Have more debt than a [debt consolidation loan](/content/blog/personal-loan-vs-debt-consolidation/index.html) or balance transfer can cover - Don’t have the credit score to qualify for other debt relief products - Only want to [consolidate unsecured debt](https://www.ncoa.org/article/how-to-consolidate-credit-card-debt-4-options/), like credit card debt - Don’t mind paying a few extra fees ### A debt consolidation loan might be better if you… - Have a decent credit score - Have secured debts, like auto loans, or a mix of secured and unsecured debt - Are confident budgeting and [sticking to a debt payoff plan](/content/blog/budget-to-pay-off-student-loans/index.html) on your own - Have creditors who won’t agree to a debt management plan - Want to continue using your credit cards and other accounts - Want more flexibility in your payment plan - Don’t want to pay a monthly fee ## Use Earnest to compare your options Still not sure what’s right for your situation? Try using an online calculator or financial dashboard—like [Earnest’s Payoff Path tool](/content/debt-management/index.html) to evaluate what fits your goals and budget. Our debt management tool helps you see all your loans in one place and supports smart, informed decision-making. Compare repayment plans and [build your own](/content/debt-management/sign-up/index.html) with Earnest today. ) ## About the Author ### Corey Buhay Corey Buhay is a writer and editor based in Boulder, Colorado. She’s passionate about literature, the outdoors, and doing her taxes by hand. She has been writing about student loans and personal finance for Earnest since 2019. You’ll find her work in Outside Magazine, Backpacker Magazine, Smithsonian, and The Denver Post. ###### Disclaimer This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.