Is a debt management company more likely to succeed in negotiating with my creditors?

Written by admin on December 6th, 2010

If you can’t keep up with your unsecured debt repayments as originally agreed, debt management may be right for you.

It 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, allowing you to repay your debts at an affordable rate.

Your creditors may agree to accept lower monthly payments, and they may also agree to freeze/reduce interest and waive charges.

But would you be able to negotiate successfully with your lenders on your own, or might a debt management company be more likely to succeed?

We will now take a look at both approaches – debt management on your own, and debt management through a professional organisation – to help you make up your mind about the approach that’s right for you.

Professional debt management
Some people struggling with their debts will ask debt management professionals for help. Bear in mind that different debt management organisations will operate in different ways, and some will charge a fee for their services, while some won’t.

If you ask a debt management organisation for help, they may:
1.    Negotiate with your creditors on your behalf.
2.    Deal with any administrative work, phone calls and letters while the plan is in progress.
3.    Re-assess your financial situation at regular intervals, so they can speak to your creditors about making changes to your debt management plan if something happens – for example, if your income or expenditure decrease or increase.

The right debt management organisation will have experience in dealing with creditors, and so should know what sort of changes your creditors are likely to accept/reject.

‘DIY’ Debt management
Other people, however, prefer the ‘DIY’ approach to debt management, and choose to negotiate with their unsecured creditors themselves. There could be various reasons for this – for example:

•    They want to remain in full control of their financial activities.
•    They don’t want to pay the fee charged by some debt management organisations.
•    They don’t want anyone else involved in their financial decisions.

However, if you choose to deal with your debts on your own, this may take a fair bit of time and effort. Negotiating with your creditors isn’t always an easy task, and some debts may be more difficult to address than others.

At the end of the day, it’s up to you whether you choose the ‘DIY’ approach or the professional approach. If you are finding it difficult to make up your mind, you could ask yourself:

1.    Has my relationship with my creditors been good so far?
2.    How good are my negotiating skills?
3.    Are my debt problems complicated?
4.    Are my maths skills ‘up to scratch’?
5.    Are my financial circumstances likely to change in the future?
6.    Do I think it’s worth paying a fee for help?
7.    Do I want to get a third party involved?

Your answers to these questions may help you decide whether or not you want to get a debt management organisation involved.

And finally: whether you choose to ‘go it alone’ or ask for help, be aware that your creditors aren’t obliged to agree to any changes to your repayment plans – and that repaying any debt more slowly (than you originally agreed) can end up costing you more and damage your credit rating.

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