In recent times debt management firms has reported an increase in the number of people requesting debt help. It is estimated that the level of personal debt in the UK is around £1.5 trillion and with the country facing tough times ahead this figure could yet increase.
Upon communicating with a debt management firm for the first time they should be asking a number of questions to determine whether you are eligible for a DMP. They will be asking questions regarding your current level of income, the number of creditors you have and what your outgoings are each month.
The company will then proceed to discuss with your creditors on a way of reducing the payments you make. They will put forward plans to stop any late fees and charges and do their best to get them dropped.
A debt management plan will enable you to stay in control of your finances and is not as restricting as formal agreements such as IVAs.
Benefits
- You are not “robbing Peter to pay Paul” by using another loan to pay off debts which would get you further into debt.
- Pay one single affordable amount each month. This will stop you from forgetting to make creditor payments and allow stricter control over your money
- Flexible agreement meaning that you do not have to go on the insolvency register or comply with rigid repayment terms
- Communications from creditors is dealt with on your behalf
Drawbacks
- If you miss payments towards your DMP then this will show up on your credit file, making it tricky to get credit in the future.
- You are required to pay back all of your debt and it will take longer as you will be making reduced monthly payments.
- Debts such as mortgages or secured loans on items cannot be covered by a DMP. Debt management plans are for unsecured debts like credit & store cards, overdrafts and so on.
Best Way to Get a Debt Management Plan?
There are two ways to get a debt management plan. Either you can do it yourself or you can make use of the services of a professional firm. While doing it yourself is the cheaper option, you will be required to contact your creditors directly and negotiating payment terms which are better for yourself. Creditors can be notoriously difficult to deal with and often hostile to customers wishing to change payment terms. It is for this very reason that debt management plan firms are so popular. Many people do not feel comfortable dealing with their creditors or simply do not have the time to come up with a plan.
A reputable and experienced debt management company will be able to negotiate efficiently on your behalf and figure out a workable plan which will enable you to pay back as much as possible and have enough to pay your essential bills.
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