Debt management – what is it?

If you’re struggling to repay your unsecured debts, a debt management plan could be the solution to help you.

By lowering your monthly repayments to a level you can actually afford, debt management can help you ensure you’ve got enough money left aside to cover your essential costs (mortgage/rent payments, for example, petrol, food and utility bills) each month.

How does debt management work?

A debt management plan is an informal financial agreement between you and your unsecured creditors. When on a debt management plan, you’ll repay your unsecured debts in lower amounts over a longer period of time – as long as your lenders agree to it, that is.

The monthly payments you make will be based on an amount you can realistically afford once your essential expenses have been taken care of.

Please note: arranging to repay your debt over a longer timeframe may mean you’ll repay more overall – this is because of the interest added to your debt each month. It can also damage your credit rating.

However, during negotiations at the start of the agreement, you may be able to ask your creditors to freeze/reduce interest and other charges. This will stop your debt from growing any more while you’re making payments towards it.

How can I enter a debt management plan?

If you feel confident in doing so, you can arrange a debt management plan on your own. However, a lot of people prefer to ask a professional debt management company to do this for them.

Setting up a debt management plan will involve talking to your unsecured lenders and negotiating the terms of the agreement. As mentioned, you can ask a professional debt management company to do this for you – and they’ll also look after the everyday running of your plan, along with any administrative work that crops up. Note that you might pay for this service if it is done by a debt management company.

Published by: admin on November 25th, 2010 | Filed under Keep Tax Records



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