Debt management – What is it?

Debt management is basically a debt solution that could help you regain control of your finances, lower the amount you spend each month, and repay your debts at an affordable rate.

If you enter a debt management plan through a professional debt management company, they will help you work out how much you can realistically afford to pay towards your unsecured debts each month – after you have covered your essential costs (mortgage/rent payments, utility bills, food, etc.). Your debt management company will then contact your creditors, asking them to agree to lower monthly payments that reflect your situation – they may also agree to reduce/freeze interest and charges so your debt doesn’t grow while you’re repaying it.

You may find, though, that debt management is not the best solution to your debts. Your lenders won’t agree to lower monthly payments unless they can clearly see you are not able to keep up with the payments you originally agreed to. Plus, repaying debts more slowly than you agreed does mean you’re not sticking to your original repayment plans and this won’t look good on your credit rating when other lenders are wondering whether they should lend you money…

Debt management is an informal debt solution, and your creditors are by no means obliged to accept any changes – although they are more likely to if they can see this will help you repay your debts at a realistic and affordable rate.

If you don’t think you’ll be able to repay the money you owe within a reasonable time frame, you may be better off looking into an alternative debt solution, such as an IVA (Individual Voluntary Arrangement) or even bankruptcy.