If you’ve fallen behind on your repayments, you may have received letters or phone calls from your lenders. These can range from mild reminders to official warnings – neither of which is likely to make you feel any more comfortable about your debts.
For anyone struggling with debt, finding the right solution is important. Here we take a look at one of the debt solutions which has helped many people: debt management plan
Aside from helping people keep up with their unsecured loans/credit card repayments, debt management has also reduced many borrowers stress levels by allowing them to leave the letters and phone calls to experts who work with debt – and with creditors – on a daily basis.
What is debt management?
A debt management plan is an informal arrangement with your lenders, in which you will make reduced monthly payments to your lenders, based on how much you can realistically afford.
In many cases, it is also possible to arrange a freeze or reduction in interest and other charges, which can prevent your debt from getting any bigger.
You can arrange a debt management plan on your own, but because of the time and effort that can be involved, you may prefer to arrange your debt management plan through a professional debt management company. In many cases, they will negotiate with your lenders on your behalf, and act as a point of contact between you and your lenders for the duration of the debt management plan.
Debt management and lender communication
As it’s an informal arrangement, your debt management plan will not impose any legal restrictions on your lenders, but if they have agreed to work with your debt management organization, it is unlikely that they will send you any more letters or make any phone calls – as long as you stick to your side of the agreement.
A note about debt management
Your lenders are under no obligation to accept the terms of a debt management plan, and if they do, it may only be for a specific period of time. A professional debt management plan will normally be agreed in six or 12-month `blocks`. This means that at the end of each agreed period, your lenders may either decide to continue with the terms as they stand or talk to your debt management representatives about arranging different terms.
Plus, you should be aware that changing the way you repay your debts can show up on your credit rating, which can affect the cost and/or difficulty of obtaining credit for the next six years.
