Struggling with debt is never a good situation to be in, and if you find yourself in trouble, you`ll want to find the best way of clearing your debts.
One way of clearing unmanageable debts is a debt management plan: an informal arrangement with your lenders that brings your monthly debt repayments down to a manageable level.
Since it`s an informal debt solution, there are no specific criteria that you would have to meet before starting a debt management plan, but your lenders will want to see that it`s most realistic way for you to repay your debts if they`re going to accept the proposed terms of a debt management plan.
Your lenders are only likely to accept the debt management plan if they can see a) that your existing debt repayments are unaffordable, and b) that your proposed new payments are realistic and would help you repay the debt in full over time.
If those points don`t apply to you, then you may want to consider a different approach to your debts. If you don`t think you`ll be able to repay your debts in full, for example, an IVA (Individual Voluntary Arrangement) or bankruptcy may be appropriate.
A debt management plan involves reducing your debt repayments to the maximum you can actually afford (once all your other essential costs have been covered). As long as your lenders agree, this can carry on either until you have repaid the debts in full, or until your circumstances improve enough for you to start making higher payments again.
Many debt management plans also involve a reduction or a freeze in interest and waiving of other charges, which can prevent your debt from growing and ensures that more of each payment goes towards paying back what you owe.
This can be a big help if you`re having real problems with your debts, but don`t forget that debt management does involve defaulting on your original debt repayment agreements - and this means it`ll have an impact on your credit rating. You should only enter into a debt management plan if you`re sure it`s the best way of clearing your debts.
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Tags: debt, clear debts, clear, debt management, debt management plans, iva, bankruptcy
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