If you’re having serious difficulty repaying your unsecured debts, it’s important you find a way of regaining control of them as quickly as you can. The longer you leave your personal debts – whether they’re on credit cards, store cards, personal overdrafts, etc. – the longer they’ll have to grow through interest and charges, which could cause you to fall into a ‘debt spiral’.
One way you could start repaying your unsecured lenders again is with a debt management plan. Here we’ll look at how agreeing a debt management plan with a professional company could give you an affordable path out of debt – with a repayment plan designed specifically for you.
How does a debt management plan work?
A debt management plan is an informal agreement between you and your unsecured lenders, which they could agree to if you find you can no longer afford your monthly repayments as originally agreed.
Your debt management company will ask your lenders to agree to lower monthly payments that you’re confident you can afford, so you’ll be making repayments tailored exactly to your circumstances. If your lenders agree to your plan, you could start making one payment every month to just one company – the debt management company – who’ll then distribute money amongst your lenders as agreed.
Furthermore, your lenders may also agree to freeze/reduce interest and/or waive any other charges on your unsecured debts, which means they won’t continue to grow as you’re repaying them. But having said that, if your lenders don’t agree, making smaller payments over a longer period can cost you more overall, due to interest.
Finally, that fact that you’re making smaller payments than originally agreed will remain on your credit record for six years, which may affect the cost of getting credit.
