Financial Resource

If you can’t keep up with your unsecured debt repayments as you had originally agreed, then debt management may help.

Debt management involves talking to your unsecured creditors, explaining to them that you can’t keep up with your repayments and asking them to accept lower monthly payments, meaning you could repay your debts in a way you can actually afford. Some creditors may agree to accept reduced monthly payments for a certain amount of time. They may also agree to freeze/reduce interest and waive charges.

So, if debt management sounds like it could help, you need to decide whether to do it on your own or ask for professional help.

Professional debt management

Some people struggling with their debts ask debt management professionals for help. Different debt management organisations will work in different ways, but in general they may:

•    Negotiate with creditors on the individual’s behalf.
•    Take care of any administrative work, letters and phone calls.
•    Re-assess the individual’s financial situation on a regular basis, so they can talk to creditors about any making changes to the debt management plan if something changes – if their income or expenditure decreases or increases, for example.

It is important to note that some organisations will charge a fee for their services.

Debt management on your own

Others prefer to manage their debts on their own, and negotiate with their creditors themselves. This could be because they want to stay in full control of their financial dealings, because they don’t want to pay the fee which some debt management companies charge, or because they just don’t want to involve anyone else in their financial decisions.

However, dealing with your debt problems on your own can take a fair bit of time and effort. Negotiating with creditors isn’t always easy and some debts may be more difficult to address than others. Plus, the calculations involved can be quite tricky, as it’s important to understand exactly how much you can afford to pay, and how to divide this among your creditors in a way that they’re likely to accept.

So, it’s up to you whether you choose to manage your debts alone or seek professional advice. If you are finding it difficult to decide, you could ask yourself:

•    Have I had a good relationship with my creditors so far?
•    Are my negotiating skills good?
•    Am I good with maths?
•    Are my debt problems complicated?
•    Are my financial circumstances likely to change further?

Your answers to these questions may help you decide whether or not to look for professional debt management help.

A note about debt management
Note that:
•    Failing to maintain payments as you’d originally agreed will show up on your credit report, potentially making it harder and/or more expensive to obtain further credit for the six years this stays on your report.
•    Repaying any debt over a longer period of time can add to the overall cost, unless your creditors agree to freeze interest on the debt.
•    Creditors aren’t obliged to agree to any changes to your repayment terms.
•    Creditors won’t accept lower payments unless you actually can’t make the original payments.

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