How Debt Management Plans Could Improve Your Finances
If you are struggling to keep your head above water due to juggling numerous debts- then you should start looking into the various options that are available such as debt management plans, consolidation or IVA. Often, people panic and are reluctant to seek help due to the fear of filing for bankruptcy. Although going bankrupt can be the best and only option in a few circumstances, it is not the only option and is certainly not the first one.
You can take a look at different ways on handling debt and figure the best one for you. In this article we discuss debt management plans as well as their pros and cons.
What is a Debt Management Plan?
Debt management plans also known as DMP, are exactly what you imagined, a plan that enables you to manage your debt. These type of schemes are available online and often you’ll need to seek out debt management plan experts before taking it any further. You can then grasp a better understanding and ensure that you apply the right set of finance experts to handle your debt. They will act on your behalf, speaking to lenders and breaking down the payment into one that you can handle.
Managing Debt & Debt Advice
If you are considering a DMP or any other type of debt relief then you should firstly look for debt advice. Speaking to professionals can help you completely understand the various options and which one most suits you. When in debt there are numerous ways for you to seek help- you can contact the lender directly but in most cases you will be in better stead by contacting those in the know. Utilise methods such as IVA, DMP, consolidation and bankruptcy. When you grasp a greater understanding of debt and financial budgeting, you will soon be able to manage your own money without any problems.
Easy to Budget
A great advantage of debt management is that it makes it easier to budget, that is because you can seek for a halt on interest rates and also schedule realistic payments. In addition to that, you’ll also be able to deal with just one company, your representative. They will help you understand what money is going out and you no longer need to get yourself into stress over paying several lenders.
Halt Interest Rates
Although this isn’t guaranteed, there often times when you’re debt management provider will be able to halt all interest rates. Rather than enduring a growing debt due to the multiple interest rates- you can find out if it is possible to freeze all interest whilst attempting to pay it back.
Lower Debt Payments
If you simply cannot afford the amounts you have agreed to, then it goes without saying- you will be getting yourself into a worse position week by week. It is possible for you, with the help of your providers to lower your repayments. They can consult your creditor and come up with an agreement of lower payments, this can in-turn make it easier for you to repay and stick to all of your regular bills.
Those dreaded terms such as bankrupt and insolvency can sometimes have a lasting effect and that is why we pull out all the stops to avoid this outcome and that is what is so great about a DMP. This plan will not show any formal insolvency and gives you a last opportunity to repay all the money that you owe.
Stop Lender Letters & Demands
As if the knowledge of missing payments and landing yourself in bigger debt isn’t enough stress- the constant letters, demands and sometimes threats can become unbearable. With professional representation from the likes of National Debt Advice- can provide you with an agreement. Although it is not mandatory, once companies such as NDA request your lender to stop bothering you, they often agree to no longer send letters and demands.
Risks of Debt Management Plans
There are things to consider before entering a plan of this sort- like anything else there are advantages and dis-advantages. There are some circumstances were this plan cannot help you.
- Not Obliged- As you probably suspected, lenders are not obliged to meet these agreements meaning they do not have to stop sending letters or demands or even agreeing to the DMP at all.
- Repay in Full- You will need to repay the debt in full and it cannot be written off
- Credit Rating- Even if your creditors accept this scheme- your credit rating will still be affected.
Before confirming the right plan for you- you should research, contact a professional and also consider the option of a neutral advisor such as Citizen’s Advice.