If you?re struggling with debts which you may be able to pay off ? then a debt management plan can be a great tool in getting you back into the black.
Such a plan can be an excellent solution for people struggling to pay monthly payments on credit cards and loans, for example, whilst still offering a reasonable degree of flexibility.
It?s particularly helpful in getting a professional to talk to creditors on your behalf and to negotiate one affordable monthly amount to your creditors and companies such as Debt Free Direct offer this service.
Your monthly payments will be based on your income, but none of your debts are actually written off. But interest payments are stopped ? and a debt management plan is open to both homeowners and tenants. It?s also flexible in that if your circumstances change, you may be able to change your payment to suit your ability to pay.
One of the best things about a debt management plan is that it is private; you don?t go on an official register of any kind and your assets aren?t usually looked at.
On the downside, your credit rating can be impaired by entering into a debt management plan. Also, such a plan may not be the best solution if your debt problem is too severe and it will be hanging over you for decades as you make the monthly payments. In such circumstances, an Individual Voluntary Arrangement (IVA) or bankruptcy may be a better solution, but these are last resorts and you should always seek professional advice before embarking on this course of action.
That said, a debt management plan doesn?t offer as much protection as an IVA, for example, when your interest and charges are automatically and legally stopped. With a debt management plan, the creditors can only be asked to stop interest and charges; this can?t be guaranteed. They may stop the interest at first ? then put it back on later and there may be little you can do about it. Creditors can even refuse to deal with your debt management company, but this is rare as they?re more interested in getting their money back eventually.
If you do consult a professional company, be careful about your choice as some charge extremely high fees both up-front and monthly. If you pay for the plan around 15% is about average for a monthly payment to the company running the plan. And if the company doesn?t charge you, then do question how they make their money; i.e. is it via donations from creditors, in which case ? are they really acting in your best interests?
Lorena Benchis, an amateur photographer, has been a business enthusiast for years. She has published on blogs and news sites and is currently in the process of writing her first book: ?The Dos and Donts of Business?. She lives in Leeds, England with her two dogs and three adopted cats?. View?full?profile
Source: http://www.business2community.com/finance/is-a-debt-management-plan-a-good-idea-0275396
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