Debt Management
Debt Management is a way of repaying personal unsecured debts that have become unaffordable and out of control. People who find themselves in need of such an approach to their debts are those who find they are consistently making their payments later than the date demanded and that the amount of money they repay is taking such a large chunk out of their income that they are finding it difficult to cope with their normal day to day expenses.
An organisation specialising in Debt Management operates by first looking in detail of the individual’s debts and income, along with their normal expenditure. They then work with the client to establish a level of repayment that is both reasonable and considered to be affordable by the client. During this process they also look at high priority debts that must be paid and that to not do so might result in more serious consequences such as the possibility of the client losing his or her home.
The next stage in the process is for the Debt Manager to renegotiate both interest rates and repayment amounts with the various lenders. Whilst the lenders will effectively reduce the amount of money they might potentially receive in the long term, in most cases they can see that, with such a debt management plan in operation, they are likely to receive more than they would otherwise if the client defaulted on the loan entirely.
It should be noted that debt management plans are only appropriate for debts that are unsecured, such as credit cards, store cards along with bank overdrafts and loans. Secured loans such as mortgages and car loans do not fall into that category, neither are these plans appropriate for debts such as Council Tax, court fines, County Court Judgements (CCJs) or arrears on utility bills.
Once a Debt Management Plan is in place the client makes a single repayment to the debt manager who then distributes this to the appropriate creditors. Generally initial consultations with Debt Management organisations are offered as a free service, though once clients get involved with the implementation of the plans then fees became chargeable. Fees are charged as part of the agreed single repayment.