Does debt management work?

30 June2009

If your debt problems have become so serious that you can`t keep up with your monthly repayments, a debt management plan could help.

A debt management plan can make your debts manageable by enabling you to reduce your monthly repayments to your unsecured debts.

However, like any debt solution, debt management is not for everyone. Whether debt management works for you will depend on your personal circumstances.

How debt management works

A debt management plan is an informal arrangement in which you would make reduced monthly payments towards your debts, based on how much you can realistically afford. Lenders aren`t obliged to agree to any changes to your repayment terms, but they may consider them if they can see it`s the best way for you to repay your debt.

Bear in mind that because your monthly payments will be reduced, you`ll be repaying your debts for longer - and because you`ll also be paying interest for longer, this is likely to mean you`ll pay more overall. However, for people who cannot repay their debts as they`d originally planned, this may not be the most important consideration.

Having said that, it would mean you`re defaulting on the terms of your original repayment agreements, and this would show up on your credit report for six years, potentially making further credit harder to find and/or more expensive.

It`s possible to arrange a debt management plan on your own, but because this can be time-consuming and a daunting prospect for some people, many borrowers prefer to arrange their plan through a professional debt management company.

Will debt management work for me?

Debt management may be appropriate for people who cannot afford to repay their debts under the existing terms, but would be able to repay their debts under different terms. If this is the case for you, then debt management may be the right choice.

However, if there is any reason to believe you may not be able to afford to repay everything you owe, a debt management plan will not be suitable - in which case it may be worth considering another debt solution, such as an IVA (Individual Voluntary Arrangement).

If you want to know more about debt management (or any other debt solution), contact one of our expert debt advisers on 0800 195 2911.

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