- Are you in debt?
- Do you feel there is no way to deal with it?
- Is the debt going up rather than down?
- Are your payments too high?
- Are you paying too much interest?
- Are your creditors hassling and stressing you out?
- Is it complicated paying so many people each month?
All of these problems and more can be dealt with by a debt management plan. This page will help to explain what is debt management.
There are many options to deal with debts. Although it’s very easy to bury your head in the sand and try and forget about debt problems, it’s much better to tackle them head on. We’ve never seen a debt problem that can’t be dealt with.
What is a debt management plan?
A debt management plan is an informal arrangement between you and your creditors to pay back your debts. It is usually arranged by a third party on your behalf, such as a debt management company. Unlike an IVA, debt management plans are informal arrangements. This means that they have lots of flexibility as they can change and grow as your circumstances change.
What are the benefits of a debt management plan?
Stopped or reduced interest
In most cases the debt management company will be able to stop your creditors charging you interest on your debts. This means that you will be able to pay your debts back much more quickly even if you are making lower payments. Whilst no debt management company is allowed to guarantee they will stop the interest on your debts, this usually happens. The benefit of stopped or reduced interest alone makes debt management plans a really powerful debt solution. However, there are many more advantages to a debt management plan.
Reduced payments
The debt management company will be able to reduce your monthly debt payments to a level you can afford. A detailed financial review will be carried out to fully understand your entire financial circumstances. Your income, expenditure, assets, and liabilities will all be looked at in detail to see what will be the best debt solution for your particular circumstances.
With this financial review the debt management company will understand what you can afford to pay on an ongoing basis and will negotiate with your creditors to allow you to repay that amount. There is no point arranging a debt repayment plan that is not sustainable on an ongoing basis. Once you are paying what you can actually afford to pay (with the interest stopped), you will actually be paying back the debt and will know that there is an end in sight.
Reduced hassle
A debt management company will not only negotiate your debt management plan, but they will keep it negotiated! Most payment plans with creditors last for 6 months, so a good debt management company will closely review your situation and renew debt management plans every 6 months. It is this constant monitoring that means that you have far less hassle from your creditors.
The debt management company will deal with every aspect of your relationship with your creditors. You can forward any letters you receive to the debt management company and if creditors call, you can tell them to call your debt management company. The office of fair trading debt collection guidelines state that creditors are not allowed to bypass your appointed debt representative. Simply said, if you don’t want to speak with your creditors again you won’t need to. You’ll have somebody to deal with all of that and more.
Easier payments
The debt management company will deal with all of your payments. For example, say you owe 10 different creditors money. Rather than dealing with 10 people to pay, you pay the debt management company one payment and they distribute this to your creditors for you. It’s not a loan, just a much easier way to manage your money. For your own peace of mind, you need to know that the debt management company has an OFT (office of fair trading) consumer credit licence, which enables the company to deal with money in this way.
Flexible debt management plans
As debt management plans are informal arrangements, they can change if your circumstances change. If your financial situation improves you can make higher payments, and if your situation gets any worse you can always reduce your payments. This way you always know that your debts are being dealt with properly.
Disadvantages of debt management plans
There is no guarantee that the interest will be stopped. In most cases this happens, and often when it’s not stopped it is massively reduced. However it’s impossible to ever guarantee that someone else will or won’t do something. As a debt management plan is an informal arrangement, the creditors don’t have to go along with it. This is where the skill and experience of a debt management company comes into play.
In a debt management plan, none of the debt is actually written off. If you are in a situation where you owe more money than your total assets (such as your home), then other debt solutions may be more effective. If you can get all of the benefits of a debt management plan and write off some of what you owe, then that is an avenue that should be looked at by your debt management company. An IVA could very well be that opportunity to write off some of your debts. Many people don’t understand exactly what is an IVA, but very basically it offers the benefits of a debt management plan plus some of the debt is written off. However, it is much less flexible and if you fail to make the payments you may be made bankrupt.
What should I do now?
The quickest way out of debt is to take action to deal with it immediately. Our experienced advisors will analyse your situation sympathetically, and work with you to work out together what is going to be the best way out of debt.
You can contact us by calling the number at the top of every page of this website, or by filling out one of our call back forms on every page. We’ll call you back and arrange a convenient time for you to go through your situation, deal with the problem, and get you on the road to financial freedom.
Contact us today to solve your debt problems. What have you got to lose? An IVA or a debt management plan could be the answer.