There are a number of options for people struggling with unmanageable debt - and which option is right for you will depend on your personal circumstances.
One of the more common debt solutions for people struggling with unmanageable debt is a debt management plan.
On a debt management plan, you`ll make lower monthly payments towards your debts - based on how much you can afford per month after your essential costs have been accounted for - over a longer period of time. This effectively `spreads out` your debts, making your payments manageable again.
Note that your lenders aren`t obliged to agree to any changes to your original repayment agreements, and that repaying any debt more slowly can add to the overall cost, as you`ll be paying interest for longer.
In some cases, though, your lenders may agree to reduce or freeze interest and other charges, which can prevent your debt from getting any bigger.
A debt management plan can be set up by you on your own, or through a debt management company, which may negotiate with lenders on your behalf and act as a point of contact between you and your lenders for the duration of your debt management plan. This can make setting up and maintaining your debt management plan much easier, but remember that there may be a fee for the debt management company`s services.
Debt management plans have helped many people over the years, but they aren`t right for everyone. You should only enter into a debt management plan if you will realistically be able to repay your debts in full. If you can`t see yourself being able to repay the full amount within a reasonable time period, you may want to consider an alternative solution such as an IVA (Individual Voluntary Arrangement) or bankruptcy.
Similarly, a debt management plan would only be suitable if you can`t afford your current repayments but can commit to regular - but lower - monthly payments. That said, if your circumstances do change once you`re on a debt management plan, your lenders may accept further changes to the way you`re repaying your debt.
Finally, `defaulting on` - failing to keep up with - the terms of a debt repayment agreement can have an impact on your credit rating, whether or not you enter a debt management plan. This would stay on your credit report for six years, and can make it harder and/or more expensive to obtain further credit in that time.
For more information on debt management plans and other debt solutions, click here or call 0800 195 2911.
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