A debt management plan can turn your unmanageable debts into manageable ones. By repaying your debts in smaller amounts over a longer period of time, you can be much more confident of ensuring you have enough to cover your essential costs each month.
A debt management plan is an informal agreement with your lenders in which you will make lower monthly payments towards your debts, based on how much you can afford, so you repay them over a longer period of time than you agreed when you first borrowed the money.
This can be arranged on your own, or through a professional debt management organisation. Many people use a debt management organisation due to the amount of time and effort that is often involved in setting up - and running - a debt management plan.
This will depend on your situation. The terms of a debt management plan are open to negotiation, and so will depend on how your lenders view the proposals.
Because a debt management plan involves making repayments for longer, you may also pay interest for longer, and this could mean you pay more overall. However, you - or your debt management organisation - can negotiate with your lenders for either a reduction or a freeze in interest and other charges, which can prevent your debt from growing.
It`s up to each of your lenders to decide whether or not to agree to this - or to any other changes to your repayment terms.
The success of any negotiations for a debt management plan will depend on how realistic the proposals are. Your lenders will want to know that you are doing as much as you can to repay your debt as quickly as you can. This is why your monthly payments to a debt management plan will take up most or all of your disposable income.
Before you make a final decision, there are some other things you should consider. As it`s an informal arrangement, your lenders are in no way obliged to accept the terms of the debt management plan. And since the plan is usually agreed in six or twelve-month `blocks` of time (after which the terms will be up for review), there is no guarantee that your lenders will choose to carry on after this time (although, in practice, it is rare for lenders to `opt out` without a good reason).
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