Different debt solutions are designed to help with different circumstances. A debt management plan is aimed at people experiencing difficulty with their unsecured debts - people with debt repayments they can`t afford, but who can still commit to (smaller) monthly payments.
Ultimately, whether or not a debt management plan can help you will depend on your personal circumstances.
A debt management plan involves making lower monthly payments towards your unsecured debts, based on what you can afford, until your situation improves or the debt has been cleared (whichever is sooner). It`s an informal arrangement - an agreement with your lenders, who don`t have to agree to any changes to your existing repayment terms, but may well do so if there`s no better way for you to pay back what you owe.
Your lenders may also agree to freeze interest and other charges - preventing your debt from growing, and enabling you to repay your debts sooner. If they don`t agree to this, however, repaying a debt more slowly does mean you`ll be paying interest on it for longer, so it`ll cost you more in the long run.
Another downside is that your credit rating will be affected. You`ll also have very little money left over each month, because you`ll be expected to pay back as much as you can.
Debt management could help you if your debt repayments have become unaffordable, as long as you still have some money to put towards your debts each month. Your lenders will expect you to contribute a reasonable amount every month, though, and you`ll have to be able to repay the debts in full within a reasonable period of time.
But if you can`t commit to regular monthly payments, or if it seems unlikely that you`ll be able to pay everything back in good time, a debt management plan probably won`t be suitable. In this case, you may want to look at debt solutions that can (on successful completion) write off the portion of your debt you can`t afford to repay, such as bankruptcy or an IVA (Individual Voluntary Arrangement).
To speak to one of our expert debt advisers about a debt management plan or any other debt solution, fill in our free call-back form and we`ll get back to you at a time that suits you.
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