Debt Management Information Library

DEBT MANAGEMENT

Consider a debt plan to solve your debt problem – see information and FAQs below.

What is Debt Management?

It's a situation which is familiar to millions of British people: due to a number of reasons your financial circumstances change suddenly, meaning your debts and other finances are put under enormous pressure.

Perhaps you were made redundant or you were subject to a pay cut – a situation common to many people especially over the last year or so – and you are now in a different financial 'bracket' than you were. Your credit cards and other loans (maybe a mortgage) are now really hard to manage.

But rather than worry when debts become hard to control, you can seek help from a debt management company. They look at your individual case and might carry out a 'means test' or audit. This helps them to work out how much you can actually afford to be paying in your new financial situation. They can then set up a debt plan to help you to pay off your debts in manageable regular payments. They can even negotiate with your creditors for you – a great relief.

My Debts are over £1,000. Can I get Help?

Most debt management companies ask that you have between £1,000 and £15,000 to be eligible for help. If you think this sounds like the amount you owe, take a moment to gather all of the debts you currently have. Find your creditor letters and then have a look through the companies that offer help.

Look at the minimum debt required and check to see what is offered – can they offer a range of debt solutions? They might offer other plans such as a consolidation loan or an IVA.

Can my Debts be Written Off?

This depends. Many debt management companies offer a possible write-off on a portion of your debts.

Some companies even offer up to 70% but before you get carried away, make sure you fully understand what this means. It might be that you will need to take an IVA for this option and there may be no guarantee that you can reach a write-off.

How much does it Cost?

Getting a debt plan or consolidation loan doesn't mean free assistance – you will be paying up to £200 a month and in many cases you are paying 30p for every pound you owe.

In addition, the debt management company might take a fee (or a number of fees) for assisting you. These vary and they may not mention these from the outset so do make sure you find out what they are.

Most fees are deducted from your monthly payments.

How Long does a Debt Plan last?

Debt plans vary in length according to your personal debt amount – it could take just a few months or last years. Your debt manager will discuss this with you.

What are the Benefits of Debt Management?

By actively seeking help to resolve your debt crisis, your creditors will back down. Your debt manager will handle many of the 'scary' parts for you, such as letters and negotiations. Your interest and charges will either be frozen or reduced and your debts will be made much more manageable. Unlike an IVA, a debt plan is not a legally binding agreement.

What are the Disadvantages?

Before you take a debt plan, make sure you go over all of your options. If your debts are really severe, it is worth seeking independent financial advice to find the most low-cost solution – you might find that a debt plan carries numerous fees, so you may need to have a large enough amount of debt to make them worth their while.