Debt management: `go professional` or `go it alone`?

10 June 2009

If you are struggling with unmanageable debt, a debt management plan could help you to get back on track and on your way to clearing those debts.

However, many people wonder whether they should `go it alone` or ask a professional debt management company to help them.

What is a debt management plan?

A debt management plan is an informal arrangement between you and your creditors in which you try to negotiate lower payments, so you can repay your debts at an affordable rate - over a longer period of time than originally agreed.

In some cases, it may also be possible to negotiate a reduction or a freeze in interest and other charges, which can prevent your debt from growing.

Should I use a professional debt management company?

It is possible to arrange a debt management plan on your own - you will need to speak to each of your lenders to negotiate new repayment terms.

However, this can be time-consuming and even stressful, and many people prefer to use the services of a professional debt management company.

One advantage of this is that a debt management company can negotiate with your lenders on your behalf. You will explain your circumstances to a debt adviser, who will then help you to draw up a proposed repayment plan, which will then be sent to your lenders.

The role of your debt management company won`t end there. For the duration of the debt management plan, they will be the point of contact between you and your lenders - so if you have any queries or concerns at any point, your debt management company can take care of it for you.

You can also feel confident that your debt management company will have dealt with many cases similar to yours before, and will have a full understanding of how the process works.

Some points about debt management

Whether you talk to a debt management company or negotiate with your creditors on your own, they won`t accept lower payments unless you actually can`t afford to keep up with payments as they stand. Plus, repaying any debt more slowly will obviously take longer and can cost you more (due to interest).

Finally, defaulting on your original repayment agreements will show up on your credit rating for six years, which can make it harder and/or more expensive to obtain credit in that time.

For more information on debt management plans and a range of other debt solutions, speak to one of our expert debt advisers on 0800 074 8639.

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