Debt Management Plan: pros and cons

At Gregory Pennington, we understand how stressful debt can be. It’s easy to feel like there’s no way out – but thankfully, we offer a range of debt solutions that could get you back on track.

A debt management plan is one such debt solution. Debt management plans involve making a single monthly payment to your debt adviser, based on how much you can afford, which is then divided amongst your creditors pro rata (i.e. a certain percentage to each creditor, based on how much you owe to each).

Of course, as with any debt solution, debt management has its upsides and downsides – it may well be that a debt management plan might not be as suited to your circumstances as, say, debt consolidation or an IVA (Individual Voluntary Arrangement).

Here we take a look at the pros and cons of debt management plans, to help you decide if it could be the right debt solution for you.

Pros

• Lower your monthly payments. On a debt management plan, your monthly repayments will be based on how much you can afford.
• If your circumstances change, so can your debt management plan. You can ask your debt adviser to re-assess your situation, and your monthly payments can be reduced (or increased) if necessary.

Cons

• Debt will take longer to pay off. Because you will be repaying your debts in smaller amounts, it will take longer to pay them off, meaning the debt could be a burden for longer.
• Not legally binding. There is no legal obligation for your creditors to accept the terms of your agreement. However, in most cases, creditors will happily accept the terms until you have finished repaying your debts, but there is a chance that when your circumstances are reviewed (usually every 12 months), your creditors could decide against continuing with the debt management plan.

Remember: You should always seek expert debt advice when considering any debt solution. A professional debt adviser will be able to provide guidance on which debt solution is most appropriate for you.