Steal My Deal

At a time like now, with the country going through (and hopefully just about exiting from) a recession, a lot of households will be facing a tough time - so how could a debt management plan help?

A debt management plan basically involves negotiating with creditors, ensuring they’re aware that you are unable to make repayments to your debts at the rate to which you had originally agreed - and asking them to let you repay your debts in a way you can afford.

Managing debts can be stressful, but many people still prefer to do so on their own. However, others prefer the convenience of letting a professional debt management company handle their unsecured debts for them.

When someone enters a debt management plan through a professional debt management company, the company will (on the individual’s behalf) negotiate with their unsecured creditors, requesting that they accept lower monthly repayments, and where possible, reduce/freeze interest. They may also be asked to waive charges.

It is important to bear in mind, though, that creditors are not obliged to agree to any changes to the original agreements. In addition, please note that different debt management companies may provide different types of services - so you will need to know what you are signing up to before you commit to anything.

Debt management plans aren’t actually dependent on credit availability or house prices - factors which could make some debt solutions, such as debt consolidation loans or remortgaging, harder to obtain and/or more expensive at a time like this.

Would a debt management plan be suitable for me?

Even if a debt management plan sounds right for you, it may not be. For example, if you can afford your repayments as they stand, debt management would not be suitable for you. Or, if you don’t think you’d be able repay your debts within a reasonable period of time, again, debt management would not be suitable for you.

Please note that if you do enter a debt management plan, you will be effectively defaulting on your original agreements - which will be recorded on your credit report for six years, meaning further credit may be harder and/or more expensive to obtain for this time.

What’s more, if you arrange to repay your debts over a longer period of time, you may repay more in the long run - due to the interest your debt will accumulate over that time.