So, what is a debt management plan (or programme)? You’ve been told it is the solution to your debt problems, the light at the end of the tunnel, but what exactly is involved? More importantly, how much does it cost?
A debt management plan is a method by which you can make affordable repayments to your creditors each month. In brief, you decide exactly how much you can afford to pay, create a payment plan based on this and negotiate the plan with your creditors.
This plan does not need to include all of your creditors. It is completely voluntary so it is entirely up to you which creditors you want to negotiate with and how much you want to offer (just remember to be realistic).
Additionally, many creditors also agree to freeze most, or even all of the interest. This means that your debts are repaid even quicker.
Why would creditors accept the debt management plan?
Your creditors do not have to accept your offer of repayment. However, many creditors are prepared to accept reduced payments when the offer you are making is reasonable and you can demonstrate that you are committed to repaying your debts.
It is usually in the best interests of creditors to accept these arrangements as failure to do so could result in the debt becoming so overwhelming that you have to resort to something like bankruptcy. At least with a debt management plan they are more likely to get something back.
How much does one cost?
The costs involved with debt management plans can vary considerably. Read our ‘How Much Does a Debt Management Plan Cost?’ article for more information.
Helpful links
How much does a debt management plan cost?
Negotiating with creditors
How can a debt management company help me?
Debt management alternatives
Debt management DIY
Remember, Advance With Finance is a completely free, impartial service. Although the information on this website is provided by industry experts, it should never replace the advice of a debt adviser who understands your individual circumstances.
What is debt consolidation?
Debt consolidation simply means replacing multiple loans with one new loan. If you have debts with different creditors, you can combine them into one loan using a debt consolidation loan.
Find out more about debt consolidation here >>
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