Will debt management affect my mortgage payments?

24 May2011

If you`re having to deal with unmanageable debts, a debt management plan could be exactly what you need.

Why?

To put it simply, a debt management plan reduces the monthly amount you pay towards your unsecured debts and allows you to repay the money you owe by making single monthly payments - which means your finances should be easier to manage.

You may be wondering if debt management would affect your mortgage payments

The answer is, it can - but in a positive way.

Basically, although a debt management plan is only designed to deal with unsecured debts, it can actually help you meet your mortgage payments (along with other essential costs).

How?

The payments you make on a debt management plan are based on the amount of money you`ve got left after covering your mortgage payments (and other essential costs - such as food and bills).

With payments set at an affordable level, you can repay your unsecured debts without worrying that you`re using money you need for your mortgage payments.

You`ll only be eligible for a debt management plan if you`re carrying several unsecured debts and you cannot keep up with your monthly payments. And while it will help you repay your debts, a debt management plan will have an impact on your credit score (because you`ll be re-arranging the way you repay your debts and defaulting on an original agreement). This will affect your ability to obtain credit for six years.

What exactly is a debt management plan?

A debt management plan is an informal agreement between you and your unsecured lenders. Your lenders aren`t obliged to accept any new repayment terms you suggest, but they`re more likely to do so if they can see you really cannot afford to repay your debts as you originally agreed to.

Your lenders may also agree to freeze/reduce the interest(and other charges/fees) on your debts, which could make it a bit easier to repay your debts in a shorter timeframe than expected. However, if your lenders don`t freeze the interest on your debts, you may end up paying more in the long run - as you`ll be paying less towards your debt each month, so your debt will have longer to accrue interest.

If your debt management plan goes ahead, you`ll be expected to pay as much as you can towards your unsecured debts on a monthly basis. This should continue until you`re able to revert to your old payments or until your debts have been repaid in full.

To find out if a debt management plan might be the right solution for your debts, give one of our advisers a call today.

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.


Tags: debt, debt management, debt management plan, unsecured debts, unsecured lenders, mortgage payments, mortgage repayments

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.