Debt Management Programme

Using A Debt Management Programme

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Advice On Using A Debt Management Programme

The most popular route out of financial difficulty in the UK is through the use of debt management programmes. These are provided by specialist debt management companies and the process involves setting up a payment plan that makes it more affordable and possible for you to repay everything you owe to your creditors.

A debt management programme will not be suitable for everyone, but if you have debts of a few thousand pounds or more to at least two creditors, and you have a steady source of income, you can probably get a plan to help you. The starting point is to approach a few good debt specialists for advice, which is easily done online these days. You can apply very quickly and easily without any obligation, after which they contact you and go through all your finances in greater detail. Only by doing this can they properly assess your situation and make recommendations for the best way to deal with your particular situation.

If your circumstances are suitable for a debt management programme, they will offer you a proposal for setting one up and advise you about how it will work and how much your payments will be. Alternatively, they may tell you that such a plan would not be the best choice for you and they might offer another option or point you in a different direction.

Getting this expert opinion at an early stage is essential in dealing with your debt effectively. It is very important to avoid any unproven or less reputable companies, or you could end up paying a lot of money to them instead of your creditors. There are plenty of well established and trustworthy companies to choose from and you can find a list of some of the best ones on the main Debt Management Companies page of this site.

Debt Management Programmes – How They Work

If you do sign up for a debt management programme, an advisor from the company you have chosen will contact all of your creditors and begin a process of negotiating for a better deal on repaying your debts. The aim of this is to freeze or reduce interest charges to stop your debt growing and bring down the amount you have to pay out each month. When this process is complete, new arrangements are set up whereby instead of paying all your separate creditors, you just make one monthly payment into the debt management programme, which will cost you less than your separate debts did.

The benefits of this are the obvious one of paying out less each month, but also the simplicity of not having to remember about and deal with all your different payments. Creditors will deal direct with the debt company and you only have the single payment to think about and have the assurance of knowing when you will be free from debt again.

All debt management programmes are informal agreements, so they are relatively easy to get out of if you change your mind or your circumstances change. However, being an informal agreement there is no way to force your creditors to join the plan if they are unwilling to do so. When signing up for a debt management programme you should always check the terms and conditions to ensure that it is not difficult to terminate the agreement should you wish to do so.

What If I Cannot Get A Debt Management Programme?

If you approach a good debt advisor and they tell you that your situation is not suitable for a plan, it may be because your income is not considered to be sufficient to service the debts you have. Debt management is about repaying everything you owe, so the relationship between what you owe and what you earn does need to be within a certain relationship. If your situation is too serious and you could not realistically repay what you owe in a reasonable timeframe, you may need to consider an alternative, more radical debt solution.

UK residents are fortunate in having a unique option open to them, specifically designed to provide an alternative to bankruptcy in very serious debt situations. This is called an individual voluntary arrangement, or IVA. This makes it possible to deal with much greater debts because it is not necessary to pay back everything you have borrowed. You make monthly payments as with a debt management programme, but these are based on what you can afford, and at the end of the IVA period, any debts left unpaid are written off. You can find out more on the main IVA UK page of this site.

The nearest equivalent for US residents is debt settlement, which also involves writing off part of the debt instead of repaying it. The idea here is to seek agreement with creditors to settle debts for a fraction of the full amount, in exchange for usually a lump sum payment or series of payments. Sometimes you have to make payments into a fund to build up enough to make these payments, other settlement companies make the lump sum payments for you and you then repay them.

Finding A Good Debt Management Programme

Debt management companies vary enormously, so it is important to only approach ones that are known to be reputable, properly regulated and with a good track record of success. You should still apply to a few so that you can compare proposals before committing yourself.

You can find a list of some of the most reliable and honest companies on the main debt management page of this site. Alternatively, UK residents can use the form at the bottom of this page to apply for a debt management programme now.

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Advice On Debt Management Programmes