Both reduce your interest rate and simplify multiple payments into one. But they work differently, cost differently, and have different impacts on your financial life.
A consolidation loan is new debt that replaces old debt. You borrow enough to pay off your credit cards, then make one monthly payment on the new loan. You keep your credit cards (they're at $0 balance now) and can technically use them again. The loan appears on your credit report as an installment loan. Rates depend on your credit score and typically range from 8% to 22%.
A debt management plan (DMP) is run through a nonprofit credit counseling agency. You don't take on new debt. Instead, the agency negotiates reduced interest rates with your existing creditors (often dropping to 6% to 9%) and you make one monthly payment to the agency, which distributes it to your creditors. Your credit card accounts are typically closed as a condition of the program.
Cost comparison: A consolidation loan charges interest on the loan balance (no additional fees from most lenders). A DMP charges a setup fee ($25 to $75) and monthly management fee ($7 to $75). DMP interest rates are usually lower than consolidation loan rates, so total cost often favors the DMP for people with fair or poor credit.
Credit impact: A consolidation loan can actually boost your score (lower utilization on cards). A DMP typically causes a small dip because your accounts are closed, reducing your available credit. Both require consistent on-time payments, which builds your score over time.
The discipline factor: This is the real differentiator. A consolidation loan leaves your credit cards open and available. A DMP closes them. If you have any history of consolidating debt and then running cards back up, a DMP is the safer choice because it removes the temptation.
Who qualifies: Consolidation loans require decent credit (660+) for rates that make mathematical sense. DMPs are available regardless of credit score, since you're not borrowing new money.
For someone with good credit and strong financial discipline: consolidation loan. For someone with fair or poor credit, or a pattern of re-accumulating card debt: DMP.