What is credit card debt management?

17 May2021
Close up of credit card

You might have ended up on this page because you searched for 'what is credit card debt management?' in a search engine. But though it sounds like a very specific term, it's actually more straightforward than you may think.

In fact, 'credit card debt management' is really no different to any other type of professional debt management. This is because debt management is designed to help people with debts they can no longer afford to repay as agreed per month - as long as the debts are unsecured.

Unsecured debts include credit cards, but also things such as store cards, personal loans, overdrafts, catalogues and any other line of credit that isn't secured against property (such as a mortgage, for example).

If you can no longer repay your credit card balance as agreed every month, as with any debt it's important you find a way of making your repayments again at an affordable pace. Falling behind with your debt repayments could lead to quickly mounting fees and charges, not to mention damage to your credit rating.

If the problem is left to get worse, borrowers with unmanageable debts could end up being issued with County Court Judgments (CCJs) by their unsecured lenders. This means the County Court will set out how the debt should be repaid - and it looks bad on a credit rating.

The next section takes a look at how debt management works.

Click here for more information about how to deal with credit card debt.

What is a debt management plan?

A debt management plan is an informal agreement that could be made between people who can't afford their monthly repayments and their unsecured lenders.

The basic idea is that by spreading your repayments out over a longer period, and making smaller monthly payments based on what you can realistically afford (after your basic living costs), you could repay your unsecured debts at a realistic rate.

Your unsecured lenders don't have to accept a new repayment plan, but if they agree to reduced monthly repayments (which they're likely to, if they think it's the best way of getting back what you owe them), you could simply make these payments until you've repaid everything you owe, or until things improve and you can make your original repayments again.

Click here to try our debt management calculator.

Furthermore, your lenders may also agree to freeze interest on your debts, which means they won't continue to grow as you're repaying them (although if they don't freeze interest, you could end up repaying more overall).

Finally, the fact you'll be making smaller payments will be recorded by credit reference agencies - this will appear on your credit record, where it'll remain for six years. As a result, you may struggle to get further credit during this time. However, since debt management plans are only suitable for borrowers who can't afford their monthly repayments, it's likely your credit rating would be affected anyway, even if you didn't enter a debt management plan.

Is debt management right for me?

If you have several credit cards you can no longer afford to repay as agreed, a debt management plan could be the ideal approach.

A debt adviser could discuss your finances with you and help you decide if debt management is suitable.

If you would like to find out about other debt solutions, click here.

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Tags: debt, debt management, debt management plan, credit cards, credit card debt, personal loans, mortgage, CCJ, credit reference agencies

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