Debt management – how could I do it?

Written by admin on March 26th, 2011

If your debts are getting out of control, then a debt management plan could be the right debt solution for you. If you can’t afford to keep up with repayments to your unsecured debts, your creditors may agree to accept lower monthly payments, freeze interest and/or waive charges – although they’re not obliged to do so.

Debt management can be done in different ways: on a debt management plan arranged by a professional debt management organisation, or on your own.

There are a few things, however, that you should consider before contacting your creditors, or asking a debt management organisation to do it for you:

–    By agreeing to repay your debts over a longer period of time, you may increase the overall amount you have to pay (due to interest).
–    If you default on a repayment agreement, this will be shown on your credit report for 6 years, which may affect the cost and/or availability of credit for that time.
–    Lenders are not legally obliged to accept the new repayment terms, or stick to them after they’ve agreed.
–    Lenders won’t accept lower repayments unless you cannot afford to make the agreed repayments to your debts.

If you decide to tackle your debts alone, there are several things you will have to do. For example, you will have to negotiate with your unsecured lenders, and ask them to allow you to repay your debts at an affordable rate.

If you choose to speak to a professional debt management company about your debts, they may do this for you.

So, should you manage your debts alone, or should you seek professional debt help?

The professional approach…

If your debts are becoming difficult to manage, then you might want to contact a debt management organisation.

This may incur a fee. However, there are several advantages of asking an experienced debt professional to manage your debts. For example:

1.    It’s not their own debt – Debt management professionals won’t be emotionally ‘involved’ with your debt, whereas dealing with the debt yourself could be a stressful experience.
2.    It’s their job – Managing multiple debts to multiple lenders on your own is by no means easy – but debt management professionals are used to it. They should know how to deal with negotiations, paperwork, phone calls, etc.
3.    They understand how debt ‘works’ – Debt management professionals will have experience of dealing with the different types of debt people have, so you can be confident they will understand yours. They should know what sort of proposals lenders are likely to accept/reject.

Your own approach…

Some people prefer to tackle their debts alone, saving themselves the fee that some debt management organisations may charge.

If you choose to address your debts alone, you should be confident you’re prepared to negotiate with your lenders and deal with phone calls, letters and so on.

Debt management is not suitable for everyone. Some people may be better off looking into an alternative debt solution such as an IVA (Individual Voluntary Arrangement) or a debt consolidation loan.

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