In these tough economic times it is a fact of life that many cannot now make contractual payments on their loans and credit cards. For people in this situation, a simple but effective method exists to pay what they can afford. It is called debt management.
It is not debt consolidation, which involves usually taking on more debt to replace the debt you already have. It is not an IVA which is a contractual five year relationship and it is not bankruptcy which wipes off debts once and for all.
The key features of a debt management plan are as follows:-
You only pay back each month what you can afford. Your payments are split on a pro rata basis amongst your creditors Your interest on the debt may be placed on hold The charges on your cards or loans may not be applied You make one payment to your debt management company and they make all your payments for you. The debt management company will take all the chasing calls on your behalf. It will usually cost you your first monthly payment to the debt management company to set up your debt management plan and 15% of your monthly payment as a management fee each month. You can stay in the debt management plan as little or as long as you like.
So if you have debts that may cost you £800 a month to service, but you actually can only afford £300 under a debt management plan that is all you would pay.
The debt management plan is excellent for those with debts between £2000 and £15,000, but people with greater debt also enter these plans often just to ease a temporary cash flow issue.
If you would like to know more about debt management, take steps to talk to a debt professional.
Tags: contractual payments, creditors, debt consolidation, debt management company, debt management plan, debts, economic times, fact of life, management fee, pro rata basis