When it comes to tackling unmanageable debt, you probably have several options. One of the most common approaches is a debt management plan - a new repayment arrangement that can make your debts manageable again.
However, there are two ways of setting up a debt management plan: on your own, or with the help of a debt management organisation.
A debt management plan is an informal arrangement with your lenders - you`d basically tell them you can`t keep up with the payments towards your debts, and ask them to accept reduced repayments. So you`ll only be eligible for a debt management plan if you can demonstrate that your current debt repayments are unaffordable - and you`ll be expected to pay as much as you can each month.
It`s common for lenders to agree to a reduction or freeze in interest and other charges on a debt management plan - which can stop your debt from growing - although this isn`t guaranteed.
There is no single reason why you should use the services of a professional debt management company when setting up your debt management plan - it`s down to personal preference. But there are various reasons why many people choose to do it this way.
If you choose to arrange your debt management plan alone, you`ll be responsible for contacting and negotiating with your lenders. This can take a lot of time, and the process can be stressful for some people. Plus, if anything changes later on, and that means you can`t stick to the new payments you`ve agreed, you`ll need to get back in touch with them all and negotiate again.
By contrast, a professional debt management company can do all of this on your behalf - they`ll speak to your lenders about a new repayment plan, so you`ll just need to explain your situation once (to the debt management company). If your debt management plan is accepted, you`ll make a single monthly payment to the debt management company, who will distribute the payment between your lenders as agreed. They`ll also be there to answer any questions you may have for the duration of the plan, and they may be able to talk to your lenders and renegotiate your payments if anything comes up while the plan is ongoing.
Bear in mind, though, that making smaller payments towards your debts will damage your credit rating and can end up costing you more since the debt would be gathering interest for longer (unless your lenders agree to freeze interest). This is true whether you work with a debt management organisation or tackle your debts on your own.
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