Debt Management Plan Guide

Debt Management Plan Guide

If you are considering making a debt management plan, you should weigh up the advantages and disadvantages.

Debt Management Plan Advantages

Here are list of the advantages of taking a debt management plan:

Freeze Interest Payments

Your interest payments may be frozen by your creditors which means that your outstanding debts will not continue to rise. However this is only a short term measure and doesn’t usually applied to the term of the loans.

Reduce Your Monthly Payments

A debt management plan may enable you to reduce the amount of your monthly payments. This is usually achieved by consolidating your debts and repaying them over a longer payment period.

Suspend Legal Proceedings

Agreeing a debt management plan with your creditors often means that you can suspend any legal proceedings against you such as county court judgments. But only are these expensive to combat, but they also have serious consequences on your credit rating.

Avoid Insolvency

By arranging a debt management plan, you will avoid formal insolvency procedures such as bankruptcy or involuntary.

Debt Management Plan Disadvantages

Here are list of the advantages of taking a debt management plan:

Poor Credit Rating

Taking out a debt management plan does not mean that you will avoid negative scores on your credit rating.

Informal Arrangement

A debt management plan is an informal arrangement that allows your creditors to change their mind at any time.

Accrue Interest

Even when a debt management plan is in place, you will continue to pay interest on your debts which may be charged at higher rates than the original loan.

Larger Long-Term Payment

By consolidating your debts into one loan that you can afford to pay every month, you’re likely to be increasing the amount of money that you owe because the turn of the loan is likely to be extended.

Longer Term Debt Repayment

The arrangement of a debt repayment plan means that you are likely to be paying your debts for a longer period of time.

Deciding to make a debt management plan is not an easy process so you should consult with debt management professionals who will be able to give you the best advice.