The Pros And Cons Of Debt Management Plans
A debt management plan is a popular route individuals choose to pay off their debt. It is an informal agreement between you and your lenders, stating how you will make monthly payments to pay off your debt.
This article discusses the main pros and cons of debt management plans.
Advantages of a Debt Management Plan –
The debt management company will deal directly with creditors, taking care of all correspondence and saving you time. They will negotiate monthly payments and freeze any interest and charges, alongside preventing any legal action your creditors may be intending to take. All monthly payments are affordable, allowing you to pay back more than one lender. If your financial situation changes, your debt advisor will renegotiate a new monthly repayment figure, thus providing you with a flexible debt solution.
A debt management plan can help you avoid any bankruptcy or the need for Individual Voluntary Arrangements (IVA) which could affect your future credit ratings.
Disadvantages of a Debt Management Plan -
There are some dis-benefits to debt management plans too.. Negotiation is not always straightforward and a debt management plan does not always guarantee that your lenders will accept your proposal for your monthly repayment figure. Also as you are paying less money back, to make it more affordable for you, this may show up on your credit ratings. A debt management plan may only be more suitable for debt amounts below £15,000; an IVA may be the best route for anything above this amount. As your monthly payments are low and affordable, it may take a while before you become debt-free.
Related reading – www.debtplandirect.com Or Uk Debt Help