A Guide To Debt Management Plans, Services and Companies
Debt management services offer a way for individuals to reduce their monthly debt payments by negotiating a lower rate with creditors, and combining the debt into one monthly repayment.
Debt management plans are usually arranged by a debt management company who will:
- Negotiate a lower payment plan with your creditors
- Ask them to freeze any interest (so you’re repayments cover the debt and not the interest!)
- Deal with all the correspondence with your creditors
- Take care of the payments (you just make one monthly payment direct to them)
Is A Debt Management Plan a Good Idea For My Debt Problems?
In most cases a debt management plan is a good idea for individuals who:
- Are struggling with a short term cash flow issue, and who’s financial circumstances are expected to improve in the near future
- Want to pay off all their existing debts but are currently struggling to keep up with their current repayment schedule
- Are looking for a way to remove the pressure from their creditors
- Can’t take out any further loans or use any remaining equity in their homes
How Much Will I Need To Pay Each Month?
The monthly payments for your debt management plan will rely heavily on what you can afford. The debt management company will calculate an affordable and realistic repayment amount based on how much you earn, how much you currently owe, and how much money you need to to live on.
With that information the debt management company will be able to work out a sum that you can realistically pay towards your debts each month.
Will A Debt Management Plan Affect My Credit Rating?
Technically once you enter into a debt management agreement you are breaking the terms of your creditor agreements. But you are actively showing willing to repay your debts.
In most cases if you are seeking ways to clear your debts and are struggling with current repayments, then your credit rating has more than likely already been affected.