A debt management plan could help you if your unsecured debt repayments have become unaffordable. It`s an agreement with your unsecured lenders, in which they`re asked to accept smaller payments that you can afford.
As with any debt solution, you need to understand what`s involved in a debt management plan before you start. Here`s a guide to the advantages and disadvantages of a debt management plan.
The idea of a debt management plan is that your unmanageable debt repayments will be made affordable again. As long as your lenders agree, you`ll pay only what you can afford towards your unsecured debts each month (once other essential costs, such as bills and groceries, have been taken into consideration).
This means you should be able to afford both your debt payments and your other essential costs.
A debt management plan is a more flexible debt solution than some others. Lenders understand that your disposable income may well go up and down, and so if you experience a fall in income, you may be able to reduce your debt repayments accordingly. Similarly, if your income increases you will be able to increase your payments and repay your debts more quickly.
However, if your income falls too much, your lenders might decide not to carry on with the debt management plan, in which case you`ll need to look at the alternative options.
Interest and other charges are often frozen It`s common for lenders to reduce or even freeze interest and other charges on your debts with a debt management plan. This stops the debts from growing, and this should help you repay them more quickly than you could if they were still accruing interest.
Be aware that lenders don`t have to do this, though, and you will pay more in interest overall if they don`t, since your debt will be around for longer.
If you`re on a debt management plan, you won`t be making the monthly payments you originally agreed - and this can be recorded on your credit history, even if your lenders accept the arrangement.
Records remain on your credit rating for six years, so you could have trouble getting further credit in that time.
You`ll be expected to pay whatever you can towards your debts on a debt management plan. This means you`ll be left with little money for anything else other than your essential expenses.
Always seek advice from an expert before deciding whether a debt management plan is the right option for you. Click here for a free call-back, or call us on 0800 195 2911.
Answer a few simple questions and we'll give you an instant recommendation on your best way out of debt.
Your privacy is important to us. All correspondence is held in the strictest of confidence and we will only request information required to find your best debt solution.
Tags: debt management, advantage, debt management advantages, disadvantage, debt management disadvantage
Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider.
Think Money Limited © 2010. All rights reserved. Pennington House, Carolina Way, South Langworthy Road, Salford Quays M50 2ZY. Company Reg No: 04926097. Registered in England and Wales.