Debt Management | Debt Advice To Manage Debts From Professionals

Debt Management Plan – Start Your Debt Free Journey

Are you going through financial hardship? If you find you are having difficulties trying to repay a debt when it is due, help is available. Many debt management plans can help people struggling to pay back their money. When it comes to debt, there isn’t a one-size-fits-all. Everyone will have different wants and needs. Debt management plans are a non-judgemental and easy way to offer a realistic and positive way to get your debts back into control. A debt management plan is a way to help you lower the outstanding amount you have on your debts and create a repayment arrangement that is easy and affordable. Keep reading to find out how we, at Center 4 Debt Management can help you begin your debt-free journey.

What Is A Debt Management Plan?

A debt management plan has nothing to do with borrowing money, and it certainly is not a type of loan. Instead, a debt management plan is known as a debt solution that aids you in paying your debts at a rate that you can manage. Most likely, you have already got an amount you and the creditor agreed to pay back. If you are struggling to pay the agreed amount, a debt management plan is perfect. A debt management plan helps you pay off the money owed at a rate that will fit your budget. It can get used for overdrafts, personal loans, and store or credit cards. A debt management plan can also identify and help you work out what debts should get paid off first and the ones that can still get worked in with a monthly payment.

When it comes to debt management plans, sometimes, the creditors are happy to waive the fees you are meant to pay and are often willing to lower the interest rate.  Why is this? The creditors have gained a lot more confidence knowing that you are trying to pay back what you owe and have taken steps to do so.

How Does Debt Managing Work?

Debt management companies can speak to the banks, other creditors, and even debt collectors on your behalf to negotiate a deal you both agree to. Deals can be lowering the monthly interest rate or reducing the amount you have to pay each month. Sometimes fees can also get waived. A debt management plan can also work with your creditors to find strategies to help you get back on your feet.

How Can A Debt Management Plan Help You?

If you have more debt than you can manage to pay back, unfortunately, the problem will worsen before it gets better. This is why you need to get a solution in place before things get out of hand. If you are missing payments, it can result in penalties such as an increase in the interest rate or default on your record that can harm your credit rating. Once you have a default on your credit file, it can make it near impossible to get finance until the period that it stays on your record for has finished. If you are still missing repayments and end up defaulting on your loan, you can expect a visit from the debt collectors.

It is easier than you think to break out of debt and get your finances back on track. While there are various options, a debt management plan is the most straightforward option. You get the support of a professional company without the complications and extra stress. You are just a step away from getting your peace of mind back.

When you speak to the professionals about a debt management plan, they will ensure you know all your decisions so you can make an informed decision.

What Is And Isn’t Covered With A Debt Management Plan?

INCLUDEDNOT INCLUDED
A building or bank loanCouncil rates
In-store creditCourt fines
Payday loans, credit cards, and store cardsCouncil tax
Money borrowed from family or associatesChild support
Personal loansNational insurance
OverdraftsIncome tax
 Student loan

What Costs Are Involved In Pay Plan Debt Management?

So many UK residents have used the debt relief via a debt management plan and took advantage of what is on offer. You can renegotiate to get a new repayment or get more time to pay the owing money. It is possible to get back on track with your finances via a debt management plan provider quickly. Those who are interested in this approach to their debt problems question the price first before going ahead. There are fees involved with debt management plans. It will depend on the final amount as to which company you go with. A monthly fee will often come out, which is often 18.5% of your monthly payment you pay. It is subject to a minimum amount of £40.00 up to £90.00 but will depend on the firm you choose. The company will estimate the pricing, so you know what you are up for without signing anything. A debt management plan comes with three options. A national debt line, a debt charity, and citizens’ advice.

Citizens Advice Debt Management Plan

Citizens advice gives you information and guidance to create your plan free of charge. The plan costs get funded by the lenders who want to encourage the consumers to control the financial matters and find a solution. If you are unsure whether a debt management plan is for you, this is the best approach. In addition, you get free advice on the options that are available to you.

Debt Management Plan Pros and Cons

PROSCONS
Negotiate with your creditorsCreditors may disagree
Lower interest rateAn agreement can get changed without notice
Reduction in the overall debt on occasionsLonger time to pay
Consolidate debt repaymentsAn effect on your credit file
Avoid legal action 
Less impact on a credit file 

Do You Qualify For A Debt Management Plan

To be eligible for a debt agreement plan, you must go through some financial hardship. You must be struggling to pay back the money you owe or have one of the following:

  • Business failure
  • Ongoing medical care and bills
  • Job loss
  • Debts from a separation
  • Over-commitment to credit that you are unable to pay back
  • Retirement and no means to repay the debt

Several Solutions That Come Under A DMP

Professional debt management teams understand that the financial circumstances of people are all different. This is why there are many options and agreements available to help you choose the most suitable for your circumstances. This will ensure that the outcome you get is sustainable and works best with your needs and wants.  To form a debt management plan, the professionals will need to take a look into your financial hardship to work out the best plan of action to help remove this debt fast so you can get back to living life normally.

Debt Agreement

An agreement of your debts is a binding and legal agreement that is between the creditors and you. It is an agreement that can be found in the Bankruptcy Act of 1966. This allows those in severe hardship financially to repay the money they owe but without harsh consequences such as complete bankruptcy.

An agreement is a more accessible and popular option for debt relief that can help to lower the amount you owe, stop interest, and aim to pay out all your debts within 3 to 5 years.

Debt Settlement

A debt settlement can help if you have a large sum, but it isn’t sufficient to pay everything outstanding in full. This is where a debt settlement can work. The design will be made to reduce the debt amount or to be used as a waiver so you can come to a final agreement with your creditors. A debt settlement will stop the creditors from harassing you, reduce your debt amount, and help you to prevent bankruptcy.

Agribusiness Settlement

Many investors are involved in the Agribusiness investment schemes that are now in debt catastrophe due to the cost involved and schemes collapsing. If you have debt collectors and creditors harassing you, then an Agribusiness arrangement can be an option. If you have a failed agribusiness scheme, it will depend on your circumstances as to whether you go via a lump sum agreement or a payment arrangement that gets taken out long-term.

Moratorium

If you are going through money trouble and have debts that you believe are unmanageable, you may seek a Moratorium. This is when the creditors let you pause repayments for a certain amount of time for a good reason. Most times, the timeframe for this is between 3 and 12 months. This allows you enough time to get things sorted and get your life back. A moratorium can get used for both unsecured and secured debts.

Loan Renegotiation

Loan renegotiation is another negotiation of the loan conditions and terms that you already have. This is to lower the interest and push for a longer loan term to get a decrease in the lowest loan repayments. You can ask for one of these if you have suffered an illness, lost your job, or going through a relationship breakdown.

What Happens Next?

The company will draft up the management plan and take into consideration your circumstances and budget. Then, they will contact the lenders on your behalf and make them aware of your situation. There is the off chance that your request isn’t granted, but you are more likely to succeed when going through a financial negotiator instead of on your own.

If you have lenders who agree with the reduced payment plan request, the funds will get drawn from the account you nominate and transferred to the creditors. The amount that you pay will then be forwarded to the lenders so the debts can get settled.

The debt management plan specialist will arrange the new agreement payment plan to get a more affordable term. You must pay the repayments when they are due; otherwise, your program can get cancelled. If you miss payments and the lender cancels your plan, you will go back to where you were before. This means you are required to pay what you were before with higher interest and extra charges. Your financial stress will return if you default on the new DMP agreement.  You will not be able to take out another loan, and it makes it very hard to get more finance in the future.

Debt Management Plan And Debt Settlement Are They The Same?

A debt management plan gets designed to give you a break when you are still paying back debt. A settlement is when you make negotiations for debt forgiveness. The lender will agree to you paying a reduced amount back, usually between 50 to 80 per cent. A debt settlement might sound great, but it can be very risky. It can take a while to come to a settlement. You are also required to pay the balance quickly and in a lump sum. There is the chance you might need to pay fees and taxes on the amount that ends up being forgiven. A debt settlement is also bad for your credit score than a debt management plan is.  It is also likely that your accounts are closed with a settlement, and you may end up as a high-risk borrower.

A few settlement companies encourage risky moves like forcing you to stop payments so the lenders will think they are not going to get any money at all and become likely to settle.

Lenders don’t have to settle and are not obligated to negotiate in any way with either you or the representative. If you choose not to pay in any way, they can take legal proceedings out on you, and you will be left in more mess than before.

What To Know About Debt Management Plans

A debt management plan can offer you some sort of relief when you have lenders that are hassling you and your debts are overwhelming. However, there are a few things to keep in mind:

DMP Debt Plans Might Not Be Suitable For Your Circumstances

A DMP is best suited for those who have debts that are mostly all unsecured debts. These are personal loans, collection accounts, and credit cards. You will also need to show you are not left with much money after everything gets paid.

The Debt Will Still Need To Be Paid

A DMP works to stop any more debt from building up from penalty fees and high interest.IOf course, you still need to pay the full amount back that you currently owe.

Nothing Is Guaranteed

The lenders may agree to work with you if they think it’s in their best interest, but there is certainly no obligation for them to negotiate in any way with you.

It Is A Long-Term Thing

When you go through a debt management plan, you need to know that it can take three to five years to finish it. That means regular payments as you are supposed to for that duration.

It Is A Commitment

Once you sign the agreement you have agreed to stick with the terms and conditions until you have finished the program. If you end up bailing out earlier, all the arrangements will stop, and penalties are applied.

Your Credit Score Will Be Affected

Once you have started a DMP, your credit score will be affected. However, in most cases, the damage is minor and is less than what you would get with other solutions such as bankruptcy. Once all your debts are paid, and the DMP is finished, you can then start to rebuild your credit score.

Saying Goodbye to Your Credit Cards

When a credit card gets used under a DMP, it will automatically be shut down altogether. You will also need to agree not to open any more credit card accounts unless you need them for an emergency.

Not All Plans Are equal

You must do your research first because not all debt plans are the same. You want to go for a non-profit counselling agency certified by the NFCC of America. Check the reviews with a strong online presence and ensure you are happy with all terms and conditions.

There Are More Options

There are different approaches to getting on top of your debt. There may be some that are more suitable than others for your individual circumstances. It is essential to seek advice from a debt management specialist to ensure that you are getting the right option. It is a big commitment when you agree to a DMP, and you need to ensure you understand everything fully before you go ahead and sign on the line. There are Debt Relief Orders, Bankruptcy, Debt Consolidations, and Individual Voluntary Arrangements (IVA), among others.

Other Things You Can Try First:

  • Talk to the lenders and see if they will be willing to lower the APR. It is actually surprising enough how many of these are successful, especially if you talk to them before the debts get too out of hand.
  • Consider looking into a hardship program that your credit card company might offer. Most companies have a program for those who are struggling to meet their payments.
  • If your credit card has a high-interest rate, consider a balance transfer over to a better, more affordable option.
  • It is best to try all of these before you go ahead and look into bankruptcy.  Bankruptcy can stay on your record for ten years and can mess up your credit score. It can be hard to recover your credit score with bankruptcy. Contacting the companies when you are struggling but still making payments is better than asking for help when they are out of control.

Each situation is different, so it is best to seek out advice from those trained in the industry who know exactly what they are talking about and what to look for when making deals. Trying to do it all yourself doesn’t work out as successfully as getting help from a professional service acting on your behalf.

Where Can I Get Debt Management Advice?

Several debt relief charities and accredited debt management companies are experienced in helping you find a way out of debt without making the wrong choices. If you are looking online, ensure they are a legit company before you sign anything.

What To Do After You Have Signed For A DMP?

After you have been successful for a DMP, unfortunately, the hard work doest stop there. There is still so much more to do to ensure that you get out of debt successfully. You have a long road ahead, but it can get done if you stick to it.

  • Get exact figures on how much you owe. Make a list of debts, what you owe, how much you must pay each month, and the due date.
  • Organize your billings so you can pay everything on time when it is due. Most companies will sting you with a late fee if you make late payments. So you are better to pay on time to avoid more fees getting added to the debt you already have.
  • Create a bill payment calendar. This will help remind you of what you have to pay to work out what comes out of which paycheck.
  • If you cannot afford to pay any more than the minimum amount, that will do. If you can pay even a few dollars extra, pay it. It looks good on your record and shows you are trying as hard as you can.
  • Work out what debts you are going to pay off first. For example, credit cards tend to have a higher interest rate than loans, so focusing on these first is best.
  • Ensure you leave yourself enough to live on when making payments. Even with debt, other things still need to get paid.
  • If you have spare money that you aren’t paying off your debts, try and use it to build an emergency fund. If you don’t have any savings to fall back on, you need to get a loan to cover emergency expenses.
  • If you feel you are falling behind again, seek help before it is too late. When everything starts piling up and getting too overwhelming to pay, you are in trouble.

How To Avoid The Pitfall

You need to make sure you investigate the debt management company properly before you agree to their terms and conditions and sign any paperwork.  Don’t fall into the trap where companies offer you a credit repair. This means they offer to fix your credit and make it look good again for a one-off fee. Credit reports cannot get deleted. Don’t fall for this. You are wasting your money.

When you are dealing with debt specialist companies, you need to get everything done in writing. Never sign anything that has only been organized via a verbal promise. Ensure you get everything in writing and always read every part of the contract carefully.

Does a Debt Management Plan Implicate A Partner’s Wage?

Yit you want to get rid of the debts quicker then it is best to include your partner’s income especially if you are living together. The debts might be in only one name but it was for the both of you then both incomes will need to come into account. You will also need to partition out the cost of household spendings. The list will then only take into account your budget and income.  If the debt is in both your names such as a shared business then both incomes will also come into play.

How To Find The Best Debt Management Plans

There is no perfect debt management plan. The best one is the one that is most suited to you. You want to find the one that has everything that suits you.

Conclusion

A debt management plan might be suitable for you, or it may not be.  Ensure that you investigate it to find out if it is the best option for you. If you cancel it when you have already started the credit rating will not go back to normal once it has been affected. It will stay on the credit rating that you have applied for a debt management plan. Be careful with expenses and only spend what you need.

FAQ’s

If you still have unanswered questions, don’t worry. There are common questions and their answers below.

Does Seeking Debt Management Help, End Up Ruining Your Credit Report?

Your credit rating will be affected when you take out a debt management plan but only slightly. They are intended to give you a little breathing space while you are dealing with repayments. Remember not to confuse a debt plan with a debt settlement, as that will really mess with your credit rating.

Are Debt Management Plans A Good thing?

Debt management plans are a good thing if you are constantly paying debts, but can’t get ahead with the interest and fees piling up.  Debt management plans help you to make smaller payments to improve your cash flow. Sometimes everything can get out of hand, and it can be hard to get out of it when it does. This is where a debt management plan can come in handy.

Are The Disadvantages Something To Worry About?

There are potential disadvantages to a debt management plan, such as those lenders who are not willing to negotiate. You can get forced to cancel all your credit cards, although you may be allowed to keep one for emergency uses only. Your credit rating will also take a small hit. Most times, the disadvantages are not much to worry about when you can handle your debts and get them paid off asap.

Are There Free Debt Management Plans?

You may be able to get assistance in helping you pay for the debt management plan but there isn’t actually management plans for free. If a company is advertising this, then it is important you don’t agree as it is most likely a scam.

Can You Sign Up Online?

You can sign up online, but it is best to talk with a credit counsellor first to ensure this is the right decision for your type of situation. You can do this via a phone interview that ranges between 20 to 60 minutes.

Do You Have To Include All Your Unsecured Debts?

There are some unsecured debts that won’t qualify for inclusion in a debt management plan.  If you do need to include them all, one might be allowed to be kept open in case of emergencies.

Is The Information Kept Confidential?

If you are dealing with a reputable company, then all your information will be kept confidential. You must be sure to review the privacy policies in case there is anything stating that your information can get shared with third parties. If it is such, then you need to opt out right away.

Will The Lender Know That I Have A Debt Management Plan?

The credit counsellor will inform the creditors that you are enrolling in a debt management plan. Each will be asked to give a concession on repayments or interests.

If I Can’t Handle The Payments, What Will Happen?

If the circumstances change when you are on the DMP, and you feel you can no longer make the payments, you need to call the agency. They will work with you to help adjust the payments accordingly to suit your new circumstances. Don’t skip payments. It is essential to get in contact first to explain the situation. You will also gain more respect by facing the problem earlier and admitting you cannot deal with the repayments and need more assistance.