If you are struggling with unmanageable debt, debt management could help. By arranging to lower your unsecured debt repayments to an affordable level, you can make sure it’s possible to cover all your essential expenses (mortgage/rent payments, secured debt payments, Council Tax, etc.) on a monthly basis.
Like any debt solution, though, debt management is by no means an ‘easy way out’ of debt. It is a significant financial commitment that will require you to contribute as much as you can towards your unsecured debts each month, and you should only commit to a debt management plan if you are certain that it is the right option for you.
How does debt management work?
Debt management is an informal agreement between you and your lenders, in which you will repay your debts in smaller monthly payments over a longer timeframe. The repayments you make will be based on how much you can actually afford after your essential expenses have been accounted for.
It is important to note, though, that arranging to repay your debt at a slower rate could result in you paying more overall, as your debt will be gathering interest for longer. However, you may find that you – or your debt management company – can negotiate a freeze or reduction in interest and other charges to prevent your debt from growing while you’re repaying it.
You can arrange a debt management plan by yourself, but many people prefer the convenience of arranging one through a professional debt management company. A debt management company can negotiate with your lenders on your behalf, look after the running of your debt management plan for you, act as a liaison between you and your lenders, and help you with any issues that come up while your plan is in progress.
In contrast, other people will choose to manage their debts on their own because many debt management companies charge a fee for their services – plus, some people are simply more comfortable tackling their debts on their own.
Debt management – would it be right for me?
Debt management, like any other debt solution, isn’t right for everyone – for example, someone who can make their agreed repayments as they stand may be advised to look into an alternative debt solution, such as debt consolidation.
Debt management – points to consider
• Defaulting on an original agreement (in other words – failing to keep up with your agreed repayments) will show up on your credit report, and will stay there for 6 years. This can affect the cost and/or availability of credit for this time.
• Your creditors aren’t obliged to agree to any changes to the original repayment agreements.