Debt Elimination

Taking out a debt management plan is one of the most commonly taken routes to help eliminate debt problems. This kind of solution can offer many people a simple and effective way of repaying and reducing debts. The beauty of taking this kind of solution is that it does not come with the restrictions that many other debt management solutions have. So, will it work for you?

What is a debt management plan?

To get the most benefits from a debt management plan most people will work with a professional debt management counsellor to set up and manage this process. This will generally involve:

• Going through your financial situation with your counsellor and setting up a monthly budget to establish how much cash you can actually afford to pay to service your debts.
• Your counsellor will then talk to your creditors and inform them that you are committing to a debt management plan. He/she will then negotiate repayments with your creditors and work to get them to freeze the addition of additional interest/charges and, in many cases, to write off some of the money that you owe.
• You then arrange to make a monthly payment (as agreed during your budget discussions) to your counsellor who will then pay it out to your individual creditors to start paying off your debts.

What are the benefits to you?

There are a variety of benefits to taking out a debt management plan. For many people this is a stress free and economical way to take control of their debt problems and to get back on track with their money issues. A debt management plan can:

• Ensure that you get out of the cycle of growing debts and debt repayment commitments. Your debt management company can negotiate with your creditors to put a stop to debt growth. As you probably already know interest and other charges simply add to your debts every month even if you actively stop spending. Our debt management counsellors are recognised industry specialists with a long history of dealing with creditors. They are known and trusted partners and, as such, can negotiate the freezing or reduction of interest and charges so that your debts don’t get any worse and you can concentrate on repaying them.
• Make sure that you get back on an even financial keel virtually immediately. With this kind of plan you commit to paying back what you can afford every month leaving you plenty of money to pay essential bills and living costs and the room to build in some disposable income for a change! This way you can take back control of your debt spending and avoid getting into further difficulties.
• Take away the stress that you are going through right now and the worry about what will happen in the future. Many people with debt problems will actually become ill with worry and can find it hard to take back control of their money. A debt management plan is often the simplest route to take because you do not have to deal with creditors yourself and you simply make one payment to service all of the debt needs which will be fully managed by your counsellor. You will also get the full support of your debt management service throughout the process. 

Are there any drawbacks to a debt management plan?

As with any debt solution there are pros and cons to a debt management plan. Issues that you may want to think about here include:

• Using a debt management counsellor may involve a fee. Are you willing to pay for the service and solution that you get here? Many people are as it takes away the stress of debt repayment and brings with it all the advantages listed earlier.
• You may only be able to use this kind of service to pay off what are known as non-priority debts. If you have priority debts such as mortgage and/or council tax arrears then you may need a different solution.
• Repaying a large amount of debt by this route can take a long time, especially if you don’t have a lot of spare cash to put towards paying back what you owe every month.
• Although your debt management counsellor can get the agreement of creditors to accept your repayment offer this kind of solution is not legally binding for them. So, if you do not stick with your plan or get into further difficulties then they may decide that it isn’t working.

Do I qualify to take out a debt management plan?

Everyone is in a different situation here and a debt management plan will work better for some people than for others. In general terms this may be a good solution for you to use to eradicate your debts if you:

• Are having problems with unsecured debts.
• Don’t qualify for an alternative solution such as an IVA as you don’t owe enough (i.e. your debts total less than £12,000).
• Don’t owe money to more than a few creditors.
• Want to sort out your debts in a confidential manner with minimal impact on your life and financial situation.

The best way to find out if a debt management solution is the right option for you is to talk to one of our debt management counsellors to assess your situation. For a free no-obligation chat with a professional money counsellor, telephone 0800 970 4835, or complete the details on our contact us page. We can help you work out the best way of getting out of the red and back into the black!