Arranging a debt management plan

If you can’t afford your unsecured debt repayments anymore, a debt management plan may help.

A debt management plan basically involves negotiating with your unsecured creditors, explaining to them that you’re not able to afford your repayments and asking that they accept lower monthly payments – meaning you’ll be able to repay your debts (albeit under different terms) at a rate you can actually afford.

Your creditors may agree to accept lower monthly payments for an agreed period of time, and they may also agree to freeze/reduce the interest (and other charges) on your debts, allowing you to repay the money you owe without being charged any more interest.

A first debt management plan can be arranged on your own… or you could ask for some professional help – but which method should you choose?
On your own

Some people prefer to remain in full control of their own finances, and negotiate with their creditors without the help of anyone else. This could be because they don’t want to pay the fee some companies charge, or simply because they don’t want to involve anyone else in the decisions they make regarding their finances.

Dealing with your debt on your own, though, can often take a lot of time and effort. It isn’t always easy to negotiate with your creditors and some debts may be more difficult to repay than others. What’s more, working out how much you should pay each month can sometimes be a bit tricky – so it’s entirely up to you whether you feel confident enough to organise a debt management plan on your own.
With professional help

Of course, if you’d prefer to ask a professional debt management company to set up your debts, they’ll do most of the work for you. In general, they may:

* Take care of negotiations with your creditors.

* Take care of any administrative work (including letters and phone calls) throughout the duration of your agreement.

* Regularly take a look at your situation so they can communicate with your creditors regarding any changes that may need to be made to the agreement (if something changes, like your income or expenditure).

So – it’s up to you which way you choose to arrange a debt management plan… but either way, repaying debts more slowly than you first said you would can mean they cost more in the long run and can damage your credit rating.