Pros and cons of debt management

Last updated: 31 August 2026

Learn what debt management firms do, what it might cost, and free alternatives to consider  

What does a debt management firm do? 

If you’re struggling with debt, it can be tempting to pay someone to sort things out for you. Debt management firms are private businesses that charge fees to help you manage debt. They may offer to: 

• negotiate with your lenders 
• set up debt repayment plans 
• challenge credit report listings or lodge complaints on your behalf 
• help with budgeting or debt consolidation 
• arrange formal debt agreements under the Bankruptcy Act 
• collect funds from you and distribute them to lenders on your behalf 

These services can seem very useful, especially if you’re in financial hardship and want someone else to deal with creditors or complaints processes. But it’s important to weigh up the cost of the service against the benefits you’ll get. It’s also important to know there are free services you can use instead. 

Pros and cons of using a debt management firm 

Possible pros 

• Help with negotiations - a debt management firm may talk to your lenders about payment plans or hardship options. 
• Support with complaints - they may help you lodge disputes or represent you in a complaints process against a lender. 
• Budgeting services - some debt management firms offer budgeting tools and may help you put together a budget that helps you avoid going further into debt.  
• Debt consolidation – They may help you consolidate multiple debts you have into one amount, to make managing repayments easier. 
• Less stress - When you feel overwhelmed, having someone else deal with creditors can seem easier. 

These benefits can be real for some people, but they come with important trade-offs. 

Debt management firms may also offer to assist you with credit repair – we cover this on a separate webpage.  

Possible cons 

• Fees you need to pay – this can include fees charged before any service is delivered. Also, total fees are not always easy to work out, which makes it hard to judge whether the service is worth the cost. ASIC’s debt management report found that up to 30% of consumer funds were taken as fees – that's money you could be using to pay off your debt instead. 
• Low value for money – free services are likely to be available that you could use to achieve the same outcomes.  
• High-pressure marketing – some debt management firms use high pressure marketing and claims about what they can do, to persuade customers to sign up for the service. 

Free help with money problems  

If you’re having difficulties with your debts, there are free services available to help you. 

Debt management 

You may be able to access free support to help you manage your debts. 

You can contact Way Forward on 1300 045 502. Monday to Friday, 9:00am to 7:00pm. 

Way Forward is a not-for-profit organisation that helps people experiencing long-term financial hardship by putting in place affordable debt management plans.  

All of the repayments you make through Way Forward go directly to your creditors. 

Financial counselling 

Financial counselling is a free and confidential service offered by not-for-profit community organisations. A financial counsellor can: 

• assess your financial situation 
• help you work out what to do if you're struggling to pay bills and fines 
• help you negotiate with government agencies, your landlord, utilities, telcos, and other creditors 
• help you if you're being harassed by debt collectors 
• refer you to other services you might need, such as legal, accommodation, health and crisis services 

Read more about what financial counsellors do and find a financial counsellor. 

Free legal advice 

Free legal advice is available at community legal centres and Legal Aid offices across Australia. They provide free legal help to those most in need. If you're facing legal action, contact them straight away. 

Legal services can help with issues like: 

• fines 
• credit and debt 
• parenting orders 
• family violence and child protection. 

Urgent help with money 

In an emergency, there are free services to help you with: 

• food relief 
• crisis payments and Centrelink advance payments 
• emergency temporary accommodation 
• emotional support. 

Check the debt management firm is licensed  

If you do decide to pay a debt management firm, make sure they’re licensed. 

Providers of debt management services must hold a credit licence with a debt management authorisation. Use ASIC’s Professional Registers Search to check the company is licensed. Only deal with a licensed credit repair or debt management company.  

Debt management firms must also be a member of the Australian Financial Complaints Authority (AFCA). That means that if you have a problem with a debt management firm, you can complain to AFCA (for free).  

Choosing whether to use a debt management firm is a personal decision. It depends on your situation, what kind of support you want, and what you can afford. These services can offer structured help, but free services may meet your needs just as well. Take time to compare your options, ask questions and make sure you understand the costs and limits of any service. This can help you make a choice that feels right for you.