Debt Management Plans

What is Debt Management?

A debt management plan is a form of debt consolidation typically for people with debts of less than £10,000. It is basically a way of consolidating your outgoings into one lower monthly payment without taking out any further credit. The debt management plan is usually an informal arrangement between you and your creditors to allow you to reduce your monthly outgoings and only pay what you can realistically afford, based on your income and expenditure.

Who is debt management suitable for?

A debt management plan may be suitable if:

• You are struggling to pay your monthly bills
• You have large amounts of unsecured debt
• You do not have enough money to pay all of your credit card, store card and loan bills each month
• You are living off your credit cards for day to day bills and expenditure because your disposable income is spent on keeping up with repayments on debt.

What are the benefits of taking out a debt management plan? 

• Only pay what you can afford
• No need to take an additional loan
• May be able to freeze or reduce interest
• If you use a professional organisation they will handle all payments for you

How does debt management work?

The company dealing with your enquiry will assess your ability to repay your debts by looking at your income and reasonable living expenses. By establishing your income and necessary expenditure, the company can calculate your disposable income i.e. what you have left to pay your creditors after paying for the essentials. The debt management company will then prioritise your debts to ensure that the essential items such as your mortgage, council tax and utility bills are paid each month and negotiate directly with your creditors in an attempt to reduce your monthly payments and freeze your interest. You will make payments equal to your disposable income each month and the payments are distributed between your creditors. Call us today on 0800 988 9232 and we can assess your situation in confidence and provide you with advice about the options available to you, based on your individual circumstances plus all advice is provided without obligation.

What can be included in a debt management plan?

A debt management programme will only cover unsecured debt such as an overdraft, unsecured loans, credit card bills, store card bills, catalogues and mail order bills. Debt Management plans cannot be used to cover secured debt such as loans secured on your property or hire purchase agreements like car finance arrangements. Also bear in mind that if you want to include an unsecured debt that you have with your own bank then they may close, restrict or downgrade your existing account. In these instances most debt management companies will be able to set you up a basic bank account with a debit card and there are now a number of pre-paid card cards available which can help customer rebuild their credit profile and an aid to budgeting. 

How much does debt management plan cost?

The Consumer Credit Counselling Service CCCS are the market leader of Debt Management Plans and provide Debt Management Plans free of charge.

What consider when choosing a debt management company?

• Ensure the company you use is regulated by DEMSA. This means that the company adopts only the highest standards of advice
• Compare and consider the costs involved
• Ensure you understand the entire process of a debt management plan and how it works.

What happens if my circumstances change?

If you are ever unable to keep up the repayments on a payment plan then the first thing to do is to make your creditors aware, either directly or through a debt management company. If your income has fallen or your expenditure increased it is a case of renegotiating with the debtors. If on the other hand you are luckily enough to have a sudden influx of cash, remember that you can cancel the debt management plan at any time, revert to making the original contractual monthly payments and even ask the lenders for full and final settlement statements to clear the debt in full.  It is important that you are advised of the right solution for you and your current situation.  To see if a debt management plan is suited to your situation call us now on 0800 988 9232 for confidential advice without obligation.

What are the disadvantages of entering a debt management plan?

• Your credit file may show that you have entered into a debt management plan and this may affect your ability to obtain finance now or in the future.
• There is no guarantee that any creditor will freeze or even reduce your interest payments.
• You can still be at risk of being made bankrupt.
• The arrangements are informal. Your creditors can change their mind at any time. 

What to do next?

Before proceeding with any solution you need to ensure that you have fully explored and understand all of the options available to you. Moneyextra can help. If, after reading this guide you have decided that an Debt Management Plan is the most appropriate solution for you then speak to a trained Moneyextra’s adviser today on 0800 988 9323 or via Live Chat.