You're buried underneath a mountain of credit card bills that seems to grow to new heights each month. You're upside down on your car payment just one year into tackling your auto loan note. Your payday loans have ballooned, and the interest is cooking like a shish kebab on an open flame.

If you're facing one or—heaven forbid—all of the scenarios described above, you may be considering your options for immediate relief, which might include a debt management plan (DMP).

What Is a Debt Management Plan?

A debt management plan is a program you enroll in where a separate company works with creditors on your behalf to negotiate interest rates and new monthly payments. Typically, these programs are structured to last roughly three to five years with the goal of paying off consumer debt entirely.

You might be thinking: Okay, I'm with you so far. But what kind of debt are we talking about here?

Glad you asked because your specific debt might not even be eligible under many plans. If you have an outstanding secured loan like a fixed-rate mortgage, auto loan or any other loan that’s tied to physical property, it won’t qualify for a DMP.

Debt management plans only work with unsecured loans. What are unsecured loans? Basically, unsecured loans are those with no collateral attached to them. Here are a few examples:

Credit card debt

Personal loans

Payday loans

Income taxes

Medical bills

Knowing this may rule out DMPs for you from the very beginning. Breathe a sigh of relief. You don't want one anyway.

Disadvantages of a Debt Management Plan?

The process might seem simple. You may be saying, I get a lower interest rate and someone else handles my debt. What more do I need to know? Well, there are a few things. Let's look a little deeper into what to expect from a debt management plan from the get-go.

1. Expect to Work With a Middleman

Put simply, when you enroll in a DMP, you enlist a credit counseling agency to serve as a middleman between you and your creditors. Once hired, they'll attempt to negotiate lower interest rates and more competitive repayment plans on your behalf. But what’s the biggest thing they don't want you to know? You're more than capable of doing this by yourself. All you have to do is pick up the phone and call your creditors.

You may be surprised to find that your creditors are willing to work with you on a revised repayment plan to avoid bankruptcy. Think about it: They want their money just as much as you want to get out of debt. So, try working together before bringing a stranger (who may have ulterior motives) to the party.

2. Beware of Hidden, Up-Front and Monthly Maintenance Fees

Unfortunately for consumers, most credit counseling agencies charge an up-front fee just to start working with them. And on top of that, you can expect monthly maintenance fees to start rolling in just for the courtesy of doing business. So even though you may be sending lower monthly payments to your creditors, there's a chance it’ll be offset by other hidden fees your new "business partner" might not be so transparent about.

3. Expect Fewer Breaks

At this point, you might be wondering: So what happens if I miss a payment while I'm in the program? That’s an excellent question! Unfortunately, if you miss just one payment, you could lose the progress you’ve made toward paying down your debts since you rolled everything into a debt management plan. You also might see your credit score drop as a result. Worth the risk? That's up to you.

4. Have Less Control of Your Finances

Ultimately, when you sign up for a debt management plan, you allow someone else to take control of your finances. Here’s perhaps the most dangerous thing about DMPs that’s invisible to most people: They do nothing to change spending behavior. If you want to take control of your money, personal finance is 80% behavior and only 20% knowledge. Oftentimes, when people consult credit counseling agencies, they slip further and further into debt because agencies don't directly solve any problems for the individual.

If you want to get out of debt, you have to own up to your previous mistakes with money and resolve to change for the better—starting today. Only then will you be able to kick that debt to the curb altogether.

Other Debt Management Alternatives to Avoid

Debt Settlement

Unlike a debt management plan that puts you on a payment plan to pay off 100% of your loans in full, debt settlement is when you negotiate with your creditors to pay them less than the total balance of what you owe.

But debt settlement can be an extremely lengthy process, and it can end up becoming extra costly. Some companies ask for a fee that can climb as high as 15–25% of the total debt you're settling.1 Say you owe $20,000 in consumer debt. That means you could pay an additional $3,000 to $5,000 just to settle!

And if you think you can just plunge into a debt settlement plan right away, think again. Consumers only qualify if they have a history of missing payments. If you're on top of your monthly payments but face a long repayment period, debt settlement is never going to be in the cards for you.

Debt Consolidation

Debt consolidation might seem like a good idea on the surface. After all, staring down just one loan versus a handful can be tempting to consider. But also consider that when you consolidate your debt, you’re accepting a refinanced loan with extended repayment terms. Usually these loans are secured against some fixed assets, which are things purchased for long-term use like real estate, equipment or vehicles.

If you think taking out a loan to settle your other loans seems a little, well, backwards, we couldn't agree more. Plus, putting up collateral just to refinance means that if you start missing payments, you could lose your home or car!

And in almost every case of debt consolidation, negotiating a lower interest rate means a longer repayment period. That means you’ll be in debt longer than you would’ve been before you consolidated.

Debt Snowball Method

Now for the moment you've been patiently waiting for. This is where we reveal the secret to getting out of debt once and for all. Are you ready for it? Are you listening? Pay off your debts like millions of people have by using the debt snowball method:

Step 1: List your debts smallest to largest, regardless of interest rate. Pay minimum payments on everything but the smallest one.

Step 2: Attack the smallest debt with a vengeance. Once that debt is gone, take that payment (and any extra money you can squeeze out of the budget) and apply it to the second-smallest debt while continuing to make minimum payments on the rest.

Step 3: Once that debt is gone, take its payment and apply it to the next-smallest debt. The more you pay off, the more your freed-up money grows and gets thrown into the next debt—like a snowball rolling downhill.

Repeat this method as you plow your way through debt. The more you pay off, the more your freed-up money grows.

That's it. The only thing standing in the way of you and a debt-free life is the choice to change your behavior and attack your debt head on. It won't happen overnight, but nearly 6 million people have taken control of their finances by going through Financial Peace University. Get the tools you need to pay off all your debt, save for emergencies, invest, and even build wealth. Start your journey today!