There is credit and then there’s too much credit. Unfortunately some people do not seem to know the difference and end up taking more credit than their income can cover in the sense that they can not afford all the required monthly payment. In these cases it is not wise to consider a consolidation loan (only one loan that can pay all other debts at once) and better think about going down the path of debt management as it can help reduce the monthly outputs to a more accessible level without the burden of taking an additional loan and interest rate.
While it is entirely possible to put your own debt management plan together through a combination of careful planning, detailed calculations and a lot of courage because you will need to deal directly with your creditors and show them that we simply cannot afford the reimbursements they are asking for. A lot of people prefer to have a dedicated debt management company do all the hard work for them instead. There are many companies in the UK so it is an important source of some of them to see which will work best in representing you. Ideally you’ll want one that does not offer you advice but an active step to negotiate with your creditors on your behalf, then bear to share your monthly payments and even on call if you have questions or concerns. For this it is likely you will have to pay a small fee however if it helps to reduce the payment of the debt significantly it can often be worth it.
When you enter a debt management credit plan it is important to remember that you must honor your end of the deal for the duration. Yes, the creditors have to deal with your debt management company rather than hassling you but still you have to keep the monthly payments up and you can have any missing creditors coming to you directly for the full amount due which could leave you in deep financial trouble. On the other hand if you’re regular with your repayments you can prove to lenders that you are able to be responsible with your money and can help repair any bad credit that is built on your credit record potentially allowing you to get more credit in the future (once the debt management plan is complete of course!).
– It is a way to reduce your monthly expenses by negotiating with your creditors more than you can afford each month.
– It is NOT the same as debt consolidation!
– It can be done alone or more commonly through a debt management company.
– It can help to repair any bad credit you may have through regular monthly repayments.
– It is legally binding and must be carefully managed to avoid creditors demanding payment.