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.


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).


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.

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

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