Budgeting on a debt management plan

2 April2021
Money and calculator

If you want to repay your unsecured debts in full, but need to lower your monthly repayments, you might be able to do so by repaying those debts more slowly on a debt management plan. One advantage is that you could clear those debts at a rate you can afford - but a disadvantage is that you'd be in debt for longer.

You'll only qualify for a debt management plan if you're able to repay at least something towards your unsecured lenders every month - and it needs to be an amount that your lenders will accept. Lowering your repayments would be recorded on your credit record for six years, which can affect your ability to borrow money.

So, you should only enter a debt management plan if you really need to - because you simply couldn't afford to repay your unsecured debts any other way. In fact, lenders won't agree to it if they can see that you could afford your original monthly payments.

Click here to find out if debt management could help you.

Repaying debts on a debt management plan

If you did decide to enter into a debt management plan, your lenders would still want you to repay your unsecured debts as quickly as possible and you're likely to feel the same way too - no one wants to be in debt forever!

The obvious way to do this if you're not expecting a 'windfall' of some kind in the near future is to budget and cut back on spending on non-essentials and luxuries. Depending on your circumstances, you're probably going to need to change your spending habits.

Budgeting on a debt management plan

There are certain levels of spending that lenders see as reasonable while you're on a debt management plan. For example, if you're spending too much on your television package or mobile phone contract, your lenders are likely to expect you to cut back on these kinds of expenses because they are non-essential.

You wouldn't be expected to give up your television or mobile completely while you're on a debt management plan, but a debt adviser could help you to find a cheaper contract or lower tariff. Then again, you might decide to try and cut back by more than your lenders say you should - after all, the more quickly you repay, the sooner you should be out of debt.

When it comes to your utilities, a debt adviser could recommend where you could find lower tariffs or cheaper deals on your utilities by switching. You would shop around for the best deal on a car before you bought one, but it's surprising how few people shop around for the best deal on their utilities. It is a bit of extra hassle, but could save you a fair bit of money overall.

You might be able to cut back on other areas of discretionary spending too, like socialising, restaurants, takeaways, clothing, hobbies and gym memberships. If at all possible, this can help you to repay your unsecured debts more quickly - even if you're not on a debt management plan.

Debt advice

If you would like to find out whether debt management could help you to repay your unsecured debts, you can request a callback from a debt adviser here.

Try our debt solution finder

Answer a few simple questions and find out which debt solutions could help you, based on your circumstances.

Your Situation

Your Details

Please remember, this is just an information tool. We would always recommend you speak to a debt advisor for the most appropriate way to resolve your debt problems.
We'll give you an on-screen recommendation and call you. One of our advisors will be in touch to answer any questions you may have about your results.
Your privacy is important to us. All correspondence is held in the strictest confidence and we will only request information required to find your debt solution.

Related resources:

Image iStockPhotos / Thomas Coburn

Tags: debt, debt management, debt management plans, budget, debt management budget, essential, non essential, priority, types of debt, budgeting

Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider. Cards are provided by third parties and are subject to eligibility, status and terms and conditions. Applicants must be UK residents aged 18 or over.

All About Money Limited © 2013. All rights reserved. 42 Boston Rd, Sleaford, Lincolnshire NG34 7ER.