Debt Management in 2010
As we enter a new year, more people are likely to find themselves in trouble with debt. Even without counting those who were already in debt, many people will have found the festive period was particularly hard on their bank balance.
If you are having problems with your debts, it’s important that you take action fast, before your debts can grow. You should always speak with an expert debt adviser at the first sign of trouble. They can help you to find an effective way of improving your situation.
If your situation has got to the point where you simply can’t afford your monthly repayments towards your unsecured debts, one option may be a debt management plan.
What’s a debt management plan?
A debt management plan is an informal arrangement with your lenders in which you’ll ask them to let you repay your debts in smaller amounts (based on what you can afford every month) over a longer period of time. In other words, it’s a way of repaying what you owe – at a rate you can afford.
You may also be able to negotiate a freeze or reduction in interest and other charges, which can prevent your debt from growing while you’re focusing on clearing it.
A debt management plan can be arranged on your own (by negotiating with your lenders directly) or through a professional debt management company. One advantage of working with a debt management company is that they will negotiate with your lenders on your behalf – saving you time and effort – and they will look after all the details of your debt management plan for its duration.
Is a debt management plan right for me?
Debt management plans have helped a lot of people, but they’re not right for everyone – so make sure you discuss your options with a debt adviser before you go ahead.
In general, a debt management plan is suitable for people with unmanageable debts that they would be able to repay if their lenders agreed to accept smaller payments. Your lenders will only accept a debt management plan if they can see that this is the best way for you to repay what you owe – and that the debt can still be repaid within a reasonable period of time.
However, remember that repaying your debt over a longer period of time could mean you pay more interest overall, too – and your debt will remain with you for longer. Plus, a debt management plan will also have an impact on your credit rating for six years. So you should only enter into a debt management plan if you are sure it’s the best way for you to clear your debts.
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