Debt management – what to consider

All debt solutions come with their own particular advantages and disadvantages but it’s how your own circumstances fit around these that holds the key to deciding whether bankruptcy, IVAs, debt consolidation or debt management are right for you.

Debt management plans could provide an efficient way for you to deal with your debts. Here are five of the main pros and cons of debt management;

Debt management advantages

• It allows you to make one affordable monthly payment
• Negotiated freezing/reduction of interest and charges (though not guaranteed)
• All creditor letters/paperwork and phone calls dealt with on your behalf
• A flexible solution allowing you to increase or reduce payments as your situation changes
• Your home will not be at risk, although you need to keep up mortgage/rent payments

Debt management disadvantages

• By paying less than originally contracted you may pay over a longer period which may increase the total amount to be repaid
• As a Debt Management Plan adversely affects your credit rating this may have an impact on you in other ways i.e. a potential employer may wish to see your credit file
• It cannot be guaranteed that creditors will not pursue any legal action
• Your creditors are not obliged to freeze/reduce interest and charges and may apply additional fees
• Fees are usually taken upfront meaning that you may go into or increase any arrears

A debt management plan can provide you with some breathing space if your debt repayments have become overwhelming and you need time to sort out your financial situation.

The amount you pay to your debt management company every month will be calculated by looking at your overall income and expenditure. Your payments will be distributed amongst your creditors which means that the pressure of phone calls chasing you for money will ease off and let you concentrate on getting your finances back on track.

In order to qualify for a debt management plan your debt should be at least £1,500. This should be between more than two creditors. It’s essential that you’ve got a regular income from which to meet your monthly repayments to your debt management company for them to then share amongst your creditors.

To find out more about any of our debt services, call us free today on 0800 043 4747 or find out how you can benefit from a debt management plan.