If you also do not know how to do debt management? Then this blog is just for you. If you are facing difficulty in controlling monthly EMI, credit card bills and many other monthly expenses, then in this blog I am going to tell you what is debt management plan?
Debt management plan means handling debt smartly. In simple words, all the loans and bills are related to the job expenses; how to reduce them gradually or eliminate them completely is called a debt management plan.
In this blog I have covered different types of debt management, what is debt management? its advantages and disadvantages, and who uses it, and I have also covered important questions, so let’s move ahead without wasting time.
What is debt management plan?
In simple words, debt management is a way by which any person can finish his debt without any pressure. For this you have to make a plan by looking at your income and expenses, in which you make a plan keeping in mind your income and expenses so that every month a little bit of debt can be reduced.
If you are facing a problem in your debt management plan, then you can seek help from an expert or company. The company from which you have taken the loan talks to them, and they either get the EMI done or extend the time of payment, due to which debt pressure is relieved from time to time, and along with that, the debt also gets reduced.
Example
Suppose there is a boy named Tarun. He has a credit bill of 50000, a personal loan of 100000, and a monthly EMI of 12000.
Tarun’s salary is only 20000. Now he is worried every month about how to pay the reimbursement and how to become debt-free.
Now he will make a debt management plan. He will make a list of all his debts, see how much is the income and expense, will set it up in such a way that he can pay a little EMI every month, if he is not able to do all this himself then he will take the help of a finance expert. He will talk to the company and get the EMI reduced or extend the time.
This will not cause much trouble for Ravi, and gradually he will also become debt-free.
How does debt management plan work?
Below I have explained the debt management plan in very simple words step by step, which anyone can read and easily make their own debt management plan.
Assessment (research)
First of all, make a list of all your loans (credit card bill, personal loan, EMI, etc.). Then see what your monthly income is and how much of it you can save by paying for essential expenses. This will let you know how much money you will save every month which will help you in becoming debt free.
In the above example, Tarun’s salary was Rs 20,000. If his expenses are Rs 12,000, then Rs 8,000 will be saved, which he will use to pay off his huge debts.
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Planning
If you are not able to make a plan yourself, you can take the help of a finance expert. He can talk to the bank from where you took the loan and get the EMI reduced, the interest rate can also be reduced a bit or the time can be extended. These things can be different in every case.
Repayment
Now you have started paying off your debt every month as per your plan. Now if you get some extra money as bonus or gift then that too should be used in paying EMI so that you become debt free as soon as possible and one more thing to keep in mind is that payment should be made on time so that your CIBIL score also improves and no extra charges are levied.
Monitoring
Now you have to see every month how much debt is left, whether the EMI is being paid on time or not, whether there is any excess expenditure anywhere. If there is any problem, then you have to solve it by making some changes in the plan.
Types of debt management
Debt management is mainly divided into 4 types.
Debt management plan
I have already told you about this above.
Debt consolidation
In debt consolidation, you combine all your small debts like credit card, personal loan etc. at one place and convert them into one big loan, due to which all the small debts get eliminated and now only one monthly EMI has to be paid.
Debt settlement
If you are not able to pay your entire debt, then you talk to the bank and make a settlement in which both parties together fix the amount which is slightly less than the full debt, which is waived by the bank.
Snowball
In the snowball method, you start by paying off the smaller debts first, so that the debt gets eliminated quickly.
Avalanche method
Avalanche Method: In this, you are asked to pay off the bigger debts first which have the highest interest rate so that you have to pay less money.
Benefits of debt management
There are many benefits of debt management, I am going to tell you 3 major benefits out of them.
Lower stress
When you do debt management correctly, then you get to know the right way to become debt-free, then the stress automatically reduces because the stress of paying EMIs every month ends, you do not have to get bothered by repeated calls or messages and most importantly there is peace at home.
Better credit score
Having a good debt management plan ensures that there is no reduction in your monthly EMI, which also keeps your credit score very good. A good credit score makes it easy to get a loan in the future, that too at a very low interest rate because the bank now trusts you that you will return their money on time.
Structured repayment
With a debt management plan, your monthly expense income remains fixed, and EMI is paid on time, so the debt gets over very quickly. The time and amount of EMI is fixed in advance. There is a balance between income and expense, and there is no confusion as to how much money to pay to whom.
Risks and downsides
There is no harm in debt management but there are some things which need to be kept in mind.
Fees
Debt management: If you take help from any finance institution, then you have to pay fees in the form of their service charges. These companies can deduct some money every month or they can take a fixed amount once. One thing must be kept in mind that sometimes the company tells about some charges later which you have to pay in the end.
So first do a thorough research about the company.
Longer repayment
Debt management plans reduce EMI, which means you have to pay more EMIs and also pay a little more interest. And it does take time to become debt-free.
 Credit score dip initially
After starting the debt management plan, your credit score can go down a little initially because the bank thinks that you are facing difficulty in repaying the loan; it is clearly visible in the reports that you have taken help, but if after starting the debt management plan, you pay the monthly EMI on time, then your credit score will become even higher than before.
Debt management Vs Debt settlement
| Points | Debt management | Debt settlement |
| means | Repay the entire loan gradually by making EMI easier | settle with the bank by paying less money |
| Who does? | On your own or with the help of a finance company | In person or through an agent |
| What happens to the interest? | Sometimes the interest rate can be low | Some part of the interest may be waived off |
| Impact on credit score | It gradually improves | Might fall a lot in the beginning |
| How to repay the loan | Repay gradually with fixed EMI every month | settle for a fixed amount |
| How much money do I have to pay in total? | full or a little less | Often you do not have to repay the entire loan |
| How much time does it take? | May take longer (1–3 years) | Can be resolved quickly (few months) |
| Is there a fee? | Yes, the company or expert may charge some fees | Agents or companies can charge hefty fees |
| Who is it right for? | Those who have the capacity to pay EMI | Those who don’t have enough money and want to compromise |
Is debt management right for you?
I’ve created the quick checklist below. You can read it to quickly determine if debt management is right for you. Let’s move on.
- Having trouble paying your monthly payments? If you’re late every month, debt management can be a pain in the ass.
- If you have taken loans from multiple sources, you can use a debt management plan.
- If there is a lot of pressure from the loan holders, then debt management can reduce your pressure a bit.
- If you need some time to pay off the loan
- If your credit score has dropped, debt management can be a great way to improve it.
If you are also facing these problems, then you can solve your problem by doing debt management.
FaQs
Will my debt be waived off through debt management?
No, these methods only make your life easier so that the debt pile gets eliminated.
Will debt management improve my credit score?
Your credit score may drop a little in the beginning, but if you pay your dues on time, your credit score will become very good.
Do I have to pay only one EMI every month?
Yes, in the debt management plan, all the loans are consolidated into just one loan.
Can any company talk to the bank for me?
Yes, the finance company can reduce the interest a little for you by talking to the bank.
Is debt management for everyone?
No, debt management is only for those people who want to pay off the loan but need some time.
Conclusion
If you’re overwhelmed by monthly EMIs, credit card bills, and debt, a debt management plan could be a wise choice. It’s not magic, but it’s a way to gradually get out of debt—without the stress and hassle.
In this blog, you learned:
- What debt management is and how it works
- Its different methods, such as DMP, Settlement, and Consolidation
- Its benefits, such as reduced stress, a better credit score, and a balanced EMI
- And some important precautions—such as fees, timing, and impact on your score
If you want to eliminate debt stress from your life, now is the time to create a proper plan.
Call to action
- Make a list of all your EMIs and debts.
- Calculate your income and expenses.
- And create a plan to pay off your debts little by little each month.
- If necessary, seek help from a trusted financial expert.
- And most importantly—make timely payments to improve your credit score and make your future easier.
If you found this information useful, be sure to share it with your friends and family – because everyone faces debt stress, but not everyone knows the solution.
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