Product Description
Debt management is one of the less severe solutions for those who are experiencing debt problems. It involves using a debt management company to negotiate with your creditors so that you pay less to them each month. Generally you will be required to make one payment to your chosen company each month and they will divide that payment up between your creditors so they all get paid. Unfortunately a lot of debt management companies charge for their services however they do deal with your creditors so you don’t have the hassle.

Main Players
There are plenty of debt management companies to choose from on the internet however the top names include Baines & Ernst, Gregory Pennington, Chiltern, Debt Free Direct and Payplan. Payplan offer their services for free and are understandably one of the most successful companies to date.

Pros of Debt Management

• Debt management allows you to repay your debts without the need for more severe solutions, such as an IVA or bankruptcy.
• A debt management plan doesn’t affect your credit history because it isn’t a formal agreement.
• The company you choose to arrange the plan deals with your creditors throughout which means you are no longer hassled by phone calls and letters.
• You can often get interest charges stopped or lowered to a much more attractive rate.

Cons of Debt Management

• Because you still have to pay the entire balance of your debts it can often take upwards of 25 years to complete a plan.
• If you can’t get the interest charges stopped you also have to pay them for the duration of the plan – which can mean you end up paying thousands more in the long run.
• A debt management plan isn’t legally binding and so your creditors can change the terms and conditions at any time. They can even opt out and demand full payment is they choose to.
• Debt management companies often charge a set up fee and a monthly fee for managing your account – and this can be up to £100 each month depending on your payment amount.

Things to Consider when Choosing a Provider
Firstly you will want to choose a debt management company that charge very low monthly fees or better still none at all. Some charge upwards of 17% of the monthly payment amount just to manage your account and this can add thousands onto the amount your pay over the term of the plan. Payplan don’t charge any fees and are well worth looking at for advice when setting up a plan.

You will also want to check that the provider you choose will give you support throughout. If they simply set the payment plan up and then leave you to get on with it then you will want to look elsewhere. Choose a company that has a 24 helpline and that conducts annual reviews of your situation. Make sure they deal with all your creditors as well so that the phone calls and letters stop coming to your house.

BUYability Summary
Debt management plans can be very useful in certain situations however they rarely reduce the amount of money you owe to your creditors. In the long run you will pay more interest on your debts but they are a good way of controlling your money now and getting you back on the right path. Debt management is less severe than the other forms of debt solution and it won’t harm your credit file – but it will take many more years to complete the plan than if you go with an IVA.