Valley Credit Union - Debt Consolidation vs Debt Management: Which Is Right for You?

Debt can feel overwhelming, especially when you’re juggling multiple creditors, due dates, and high interest rates. For many Oregonians, two of the most effective ways to regain control are debt consolidation and debt management.

They both allow you to organize your debt into one simple, manageable monthly payment, but each approach works differently.

Understanding the difference between debt management vs debt consolidation vs debt relief can help you choose the approach that fits your credit score, debt type, and long-term financial goals. This guide explains how each works, their pros and cons, and how to decide which is best for you.

Debt in the U.S. and Why These Tools Matter

The average American household carries $105,056 in debt, which includes everything from mortgage payments and student loans, to personal loans and credit card debt.

The average household credit card debt alone is $10,899. With credit card interest rates averaging 24.35% APR, that debt can grow fast, making it even harder to get ahead. It’s easy to see why monthly payments can snowball quickly.

If you’re feeling the weight of high-interest debt, credit unions like Valley Credit Union offer solutions designed for the local community. By working for their members and not shareholders, credit unions often offer lower rates and more flexible terms than big banks.

Debt Management vs Debt Consolidation vs Debt Relief: The Basics

The term “debt relief” covers a wide range of strategies designed to make debt repayment more manageable. This includes debt consolidation, debt management, debt settlement, and, in extreme cases, bankruptcy. Debt consolidation and debt management are two of the most common and often confused options.

Here’s how they differ:

Debt Consolidation:

Debt consolidation combines multiple debts into a single monthly payment, usually through:

A debt consolidation loan from a credit union or bank
A balance transfer credit card with a lower interest rate

The goal is to simplify repayment and reduce interest so more of your payment goes toward the principal balance.

Debt Management:

A debt management plan (DMP) is a form of debt relief offered through a credit counseling agency. The agency negotiates with your creditors, often lowering interest rates or waiving late fees, and you make one monthly payment to the agency, which then distributes it to your creditors.

Here at Valley Credit Union, we partner with Balance to connect members with reputable debt management services.

Debt Settlement and Why It’s Different

When comparing debt management vs debt consolidation, it’s important to understand that debt settlement is different from both options.

With debt settlement, you negotiate with your creditors to settle your debt for less than what you owe. While this can reduce your total debt, it often comes with:

Significant credit score damage
Potential tax consequences (the forgiven debt may be taxable)
Risk of additional fees

Debt settlement is typically considered a last resort before bankruptcy, not a first-line strategy.

When to Consider Debt Consolidation

A debt consolidation loan or credit card balance transfer is often a great option for people who have relatively high credit scores (670+) and a lot of unsecured debt (i.e., debt that is not backed by an asset like a home or car). It’s also important to make sure that you have a stable income and can cover each monthly payment.

Benefits of Debt Consolidation:

Potential for lower interest rates and long-term savings;
One predictable monthly payment;
Most types of unsecured debt can be consolidated, including credit card debt, utility bills, medical bills, and student loans;
You can usually still borrow money while you’re paying off consolidated debt.

Drawbacks of Debt Consolidation:

Many people’s credit scores are too low to qualify for a low-interest credit card or loan;
Not all debt can be consolidated. Mortgage loans and auto loans are typically eligible;
People who aren’t fully committed to paying each month can end up accumulating more debt.

If you think debt consolidation might be a good fit for you, try our debt consolidation calculator to see your potential monthly payments and interest savings.

When Debt Management May Be a Better Fit

Debt management may be a better option if you have many debts that are becoming too difficult to deal with on your own, you have a lower credit score and can’t get a low-interest loan, or you want professional support and accountability.

Benefits of Debt Management:

Debt collectors communicate with your counseling agency instead of you;
You don’t need to qualify for a new loan or credit card;
May reduce or waive interest and fees;
Credit counseling agencies help you stay accountable and avoid adding to your existing debt.

Drawbacks of Debt Management:

Creditors may suspend or close your current lines of credit, so you can no longer use them. (Creditors will sometimes reopen them if you successfully complete your DMP, though);
DMPs typically don’t include secured debt (like mortgages and car loans);
All eligible unsecured debts must be covered in a DMP, even the ones you have no trouble paying.

Alternatives to Consider

If you have a lot of secured debt and/or you don’t think either of these approaches is right for you, keep in mind that there are other debt relief options available to you. These include:

Refinancing secured debt (like a mortgage) to free up monthly cash flow
Negotiating directly with creditors for hardship programs
Bankruptcy (only after exhausting other options)

FAQs About Debt Relief

What’s the difference between debt consolidation vs debt relief?

Debt consolidation is a type of debt relief that rolls multiple debts into one new loan or credit card, ideally at a lower interest rate. Debt relief is a broader term that also includes debt management plans, debt settlement, and bankruptcy.

Does debt consolidation hurt my credit score?

You may see a small drop from a hard inquiry, but paying on time can improve your score over time.

How long does debt management take?

Most plans last 2 to 5 years, depending on your total debt and payment consistency.

Can I get a debt consolidation loan with bad credit in Oregon?

Yes, but rates may be higher. Credit unions like Valley Credit Union often have more flexible lending criteria than large banks.

Will I be able to use my credit cards during a debt management plan?

Usually no. Creditors often suspend accounts until the plan is complete.

Valley Credit Union can help you take control of your debt

At Valley Credit Union, we’ve helped our members in Oregon take charge of their debt through debt consolidation loans and debt management programs. Whether you’re comparing debt management vs debt consolidation or just looking for ways to simplify your payments, we’ll walk you through your options and help you make the best decision for your financial future.

Are you ready to take the first step? Contact us today or try our Debt Consolidation Calculator to see what your payment could look like.

About the Author

Katie Clark, Director of Administrative Services

Katie Clark has been at Valley Credit Union since 2011. She serves as the Board Secretary and oversees Human Resources, Marketing and Facilities for the credit union, some even call her the credit union mom. As a CUNA and GoWest HR council member she stays connected with the latest industry happenings. When she’s not in the office she enjoys weekends with family & drinking wine at the Oregon coast.

Debt Consolidation vs Debt Management: Which Is Right for You?