Debt Management Step By Step
When you’re considering a debt management plan as a debt solution, there are a number of things you need to take into account.
Below we’ve highlighted 4 key steps which will make you more aware of the debt management process and what you need to consider.
Choosing a debt management company
There are many debt management companies out there and unfortunately some of them are unscrupulous. You should beware of any companies who make promises they can’t back up such as guaranteeing your interest and charges will be frozen.
While they may be able to get your creditors to agree to this, they certainly can’t guarantee anything prior to speaking to them on your behalf.
If you get a bad feeling about a company when you call them or they don’t ring you back when they say they will, don’t be afraid to look elsewhere, because it’s your financial future at stake.
Is a debt management plan the right solution?
In order to qualify for a debt management plan you should owe a minimum of £1500 and have at least 2 different creditors.
In certain cases an alternative to a debt management plan may be a debt consolidation loan.
Debt management plans are designed for lower levels of debt and can provide short-term relief from the overwhelming burden of high interest payments.
You should always speak to a professional debt advisor before making a decision about going ahead with a debt management plan. It’s critical that you get the right debt solution based on your own circumstances in order for it to be successful.
Keeping focused
It’s important not to let the initial relief that a debt management plan can bring lull you into a false sense of security. Despite the fact that your creditors may have agreed to reduced monthly payments and freezing interest on your debts, your overall level of debt will not go down.
Once your debt management plan is in place your focus should be on how you’re going to manage your debts in the longer term.
Debt management plans are not legally binding like other debt solutions such as Individual Voluntary Arrangements (IVAs) so you need to be prepared to find a more permanent solution.
Your long term plan
A debt management plan can provide valuable breathing space from repayments that have spiralled out of control, but there will come a time when you have to start paying back the full amount to your creditors every month.
If your circumstances change during the course of your debt management plan such as receiving a cash windfall, you should inform your debt management company immediately as it’s also in your best interests to clear your debts as soon as you possibly can.
If you have no realistic hope of being able to make the full repayments to your creditors again then you shouldn’t enter into a debt management plan as this will only delay the inevitable.
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