A debt management plan could be the right option for you if you can`t make your monthly unsecured debt repayments, but feel you could afford to pay back all your debts in smaller instalments.
Before you go ahead, though, you`ll need to consider what`s involved. Like any debt solution, debt management plans have their upsides and downsides.
Assuming your unsecured lenders agree, your debt management plan will involve reducing your monthly debt repayments to a level you can afford. This will be based on what`s left of your income once your other essential costs have been taken care of. You`ll be expected to pay as much as you can at all times.
You may also be able to negotiate a reduction or even a freeze in interest and other charges. This can stop your debt from getting any bigger, and more of each payment you make will go towards clearing the actual debt. If your lenders don`t agree to this, you`ll pay more interest in total, as your debt will accrue interest for longer.
Debt management plans are only suitable for people who can`t afford to repay their unsecured debts they way they should be doing, but can afford to repay the debt within a reasonable time by making smaller payments.
If this doesn`t apply to you, a debt management plan won`t be right for you, and you`ll need to look at other, more appropriate, debt solutions.
Before you try to arrange a debt management plan, there are a few things you`ll need to take into account.
A debt management plan will require you to fully focus on repaying your debts. You`ll be left with little spare income, because you`ll be expected to pay what you can at all times.
Plus, repaying your debts in smaller monthly amounts will mean you`re not sticking to the repayment agreements you originally signed up to - and this can damage your credit rating. Because you won`t be repaying your debts as you originally agreed, your lenders may register `defaults` on your credit report, and this can make borrowing money more difficult and/or expensive while it`s on your credit report.
If you`re thinking about arranging a debt management plan and want to know more, click here or call us today on 0800 195 2911.
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