A Debt Management Plan is a quite common solution for debt problems. There are organisations who charge to provide you with a Debt Management Plan and there are others who can provide you with a free debt management plan.
Like all debt solutions there are some good things and some bad things. This guide explains both the good and the bad and provides information on where to go next if you are thinking about getting one.
What is a Debt Management Plan?
In a nutshell a Debt Management Plan is the following: –
- It is an informal arrangement between you and your creditors.
- You make one payment to the organisation acting on your behalf and they make the payment to your creditors.
- A payment is calculated on a pro rata basis to each of your creditors. In other words they each get a fair amount based on how much you owe and how much you pay in to your debt management plan.
What is good about a Debt Management Plan?
Here are the good things if you are thinking about this type of debt solution.
- You make one payment and the debt management company takes care of the rest.
- Most creditors will freeze interest and charges.
- The amount you pay towards your debt will be affordable to you.
- If you choose a plan from StepChange or Payplan there aren’t any fees.
- This arrangement is not as severe as Bankruptcy or an IVA.
What is bad about a Debt Management Plan?
Most things have a bad side and a Debt Management Plan is one of those things. Here are the bad bits.
- You can only include unsecured debt. Loans secured against your home or property for example can’t be included.
- Interest and charges may still continue meaning you are in debt for longer or you will not know exactly when you will be debt free.
- A Debt Management Plan is an informal solution, this means your creditors could still take further action against you.
Other things to consider
Now that you have seen some of the good and the bad there are other things to think about. Is a Debt Management Plan right for you? Let’s say you have a lot of debt and to repay that debt will take ten years then it is likely not the best option for you. Other solutions such as an IVA may be more suitable.
Having seen the above, why not visit the Get Debt Help section on this site to find details of one of the Debt Charities. They can offer you the advice you need to start putting a plan together to sort out your debt once and for all. As these companies are funded by the creditors they aren’t under any pressure to sell you things. They also offer free Debt Management Plans.
Best of luck with your Debt. I hope you can get things sorted.