The Benefits of a Debt Management Plan

Article Written By: Keith Cooper

The main reason that people choose to use an agency to provide them with a debt management plan is that when people find themselves in financial difficulty they can order the repayments based on their ability to pay. A debt management plan also means that the interest rates on the money owed is potentially frozen, so that the debts may not increase. So instead of paying off the interest every month you actually pay off your debts.

Banks and credit card companies are often more responsive to applications made by debt advice agencies but you could go alone if you felt you could handle it.

They can really help people with money problems by administering the repayments and acting as a buffer between the borrower and the creditors. A further benefit of a debt management plan is that people no longer have to deal directly with their creditors. In fact the payments are made to the debt advice company, which then passes them on to whoever is owed the money. Debt advice companies generally charge around 15% of the monthly payment as their fee and there are also some other administration costs.

Debt management plans are a popular solution for people with unsecured debts that they cannot afford to repay, as well as people that do have equity in their properties but are keen to avoid having to remortgage or take out a secured loan. It is also an option for those with debts of under 15,000, which means they do not qualify for an Individual Voluntary Arrangement (IVA). It is also ideal as a short term solution for those that only owe money to one or two different companies as with an IVA you need to have 3 creditors.

Furtermore, the main advantages are the fact that with only one regular monthly payment to make it means that people can have better control over their finances and the creditors might agree to freeze interest and charges on the debt and could stop other action like being taken to court. Ultimately the key benefit is that if the plan is completed then the unsecured debts will be cleared.

It is important to note that it is only possible for people to enter into a debt management plan if they have some money remaining each month after all essential expenses have been paid. So it is sensible for anyone looking into this to create a clear budget, including the monthly income and all the regular necessary monthly household expenses.

About the Author

Keith Cooper Works for one of the Largest Debt Companies in the UK Baines and Ernst

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