11 Feb 2010 Tell a Friend
If you're heavily in debt, it can be hard to look objectively at your situation and work out what needs to be done. Here we explain some of the options available to you to help you decide which route might be best for you.
Debt management
A debt management programme (also often known as a debt management plan) involves working with a debt management specialist to plan out your repayments more effectively. A debt management plan is not a legally binding arrangement, so it will not show up on your credit history. But why would you choose to use a debt management specialist rather than simply plan out the repayments yourself? Some people do find that they can get a handle on their debt situation by talking to their creditors and budgeting more effectively. Others find that communication breaks down with creditors or that they need some help with the process of planning out repayments.
A debt specialist would take a close look at your monthly income and outgoings and help you determine how much you could afford to pay back each month. They will negotiate with your creditors on your behalf, and can get interest rates reduced or frozen in exchange for a fixed monthly repayment. For this process to be effective and worthwhile, you need to be able to pay back at least ���£100 per month to your creditors.
Some debt management companies charge a fee for their service, and if this is the case, you need to make sure that you get details of any fees in writing and agreed upon before you formally employ them. Services such as the Consumer Credit Counselling Service can offer you free advice, so this could be an option to consider as a starting point.
Alternatively click here to receive a callback from a debt management specialist for a free consultation about your options for clearing your debt.
Debt consolidation
Debt consolidation is a loan that you take out to pay off your existing debts. As you're effectively replacing one debt with another, you should only consider debt consolidation if you can save significantly on your monthly repayments. This situation may arise if the bulk of the money that you owe is on credit cards or store cards, where the interest rates can be extremely high. Unsecured personal loans can be obtained at relatively low rates, provided that you have a credit history that suggests to a loan company that you would be
The advantages of debt consolidation are that you can give yourself breathing space by negotiating an unsecured loan with a lower interest rate and possibly also with a longer repayment period than your existing financial commitments, and also reduce the administration that you have to take care of each month.