Debt: Debt Management Plan- Getting Help
This explanation of a debt management plan is designed to help people who have a debt problem and need help. If you would like help and some advice on debt then don't hesitate to contact Debt Support Trust, a registered telephone and internet debt advice charity helping people across the UK.
Debt Support Trust can be contacted on 0800 085 0226 or visit our debt analyser to submit your information and a caring debt advisor will call you back.
Your Debt: Debt Management Plan
Often people can feel ashamed, worried and panicked about their debts. Debt management is one route to resolving a debt problem. For some people, debt management will not be suitable because their disposable income is not large enough or perhaps because the debt management plan would last too long.
We can't promise a fix overnight and we won't tell you it'll be easy but we will be by your side to help you overcome your debt. Debt management is a well known term used within the debt industry; it's on TV, radio, newspapers and even creditors talk about it, but what does Debt Management mean?
Debt: Debt Management explained
Debt management is one debt solution which helps you repay all of the money you owe but over a longer than originally agreed period of time. If every month you are just paying back the interest then how can you get out of debt? It becomes a continuous cycle of paying the interest but getting nowhere.
Roughly 500,000 people are in a debt management plan at any one time in the UK. It's a popular debt solution because it enables you to pay an affordable amount towards your debt each month and repay the money you borrowed.
In a debt management plan the creditors will be asked to freeze interest and charges to make it easier to repay the money you borrowed. There are two types of organisations providing debt management plans for people, for-profit and free debt management companies. We would always recommend using a free debt management organisation.
For-Profit Debt Management
A for profit debt management company will ultimately be focussed on generating profits from the service they provide. As such, the for-profit debt management company will often charge an upfront fee. This upfront fee can be anything from 2 - 5 months of your disposable income. This would mean that potentially your creditors would not be paid for 5 months to enable the for profit debt management company to receive their fee. Each month the for profit debt management company will keep between 12% - 50% of your monthly disposable income. So, if you paid £100 towards your debt, the debt management company would keep up to £50 each month.
In return, the for profit debt management company will manage your debt management plan and distribute your disposable income (minus the fee they keep).
Free Debt Management
A free debt management is provided by one of the select few debt management organisations who are paid to provide free debt management plans by the creditors. This means that if you owe £10,000, you will repay the £10,000 and the free debt management company will be given money by the creditors for collecting in the money. The free debt management companies often received 10% of the money they collect.
A for profit debt management plan will take longer than a free debt management plan because of the additional fees you will pay. Debt Support Trust will help you with a free debt management plan and help you become debt free as safely and quickly as possible.
Debt: Debt Management Points to note
- The creditors don't have to freeze interest and charges with your debt in a debt management plan
- It's an informal debt solution, which means you or the creditors can change the plan at any stage.
- It will affect your credit rating because you're not repaying your debt as you said you would.
Debt Help with a Debt Management Plan
Debt Support Trust can provide debt help with a debt management plan. The first stage is for a friendly debt advisor to confirm your income and expenditure. It's also important to consider your assets, like a house or car, so we can explain what would happen with these too.
The debt advisor's role within the charity is to provide you will all of the appropriate debt solutions, explain the pros and cons and help you with whichever solution you choose. You are under no obligation to accept the advice we have offered.
Is Debt Management Right For Me?
If you are wondering whether a debt management plan is the correct solution for you then call Debt Support Trust. Our charity advisors would be more than happy to help you determine whether you are applicable for this debt solution.
You can call Debt Support Trust on 0800 085 0226.