How do I know if debt management is right for me?

A debt management plan can be a big help if you find yourself struggling with debt repayments that you can`t afford.

However, like any debt solution, debt management plans have their potential downsides, and you should be sure that it`s the right option for you before you make a decision.

How does debt management work?

A debt management plan is an informal repayment arrangement with your lenders. If they agree, you`ll make smaller monthly payments towards your debts, based on what you can realistically afford once you`ve taken your essential expenses into account (your rent/mortgage, your utility bills, your food & petrol costs, etc.).

It may also be possible to reduce or freeze the interest and other charges on your debts, which can prevent your debt from growing. Note that repaying your debts more slowly can increase the overall cost if your lenders don`t agree to this, as your debt will have longer to accrue interest.

It is possible for you to set up a debt management plan by negotiating with your lenders on your own, but this can be a time-consuming process, and many people prefer to let a professional debt management company negotiate with their lenders and arrange the debt management plan on their behalf.

Things to consider

A debt management plan requires you to commit to regular monthly payments. You will be expected to pay as much as you can afford towards your debts each month. If there is any reason to believe you won`t be able to do this - if your income is erratic, for example - then a debt management plan is unlikely to be suitable.

Because your debt management plan will involve paying less towards your debts (on a monthly basis) than you originally agreed, it`ll have an impact on your credit rating, which can make borrowing money more difficult and/or more expensive for the six years it remains on your credit report.

So it`s only worth entering into a debt management plan if you are really struggling - in fact, creditors won`t agree to accept smaller payments unless they can see that you can`t keep up with the payments you agreed to.

If you`re thinking about entering into a debt management plan, call 0800 161 3516 today.