The benefits of a debt management plan

If you’re struggling to keep on top of your bill payments, you may feel overwhelmed by the number of choices available to those in debt.

Seeking out debt management advice from an impartial adviser is always an excellent way to explore your options – which include debt management plans, individual voluntary arrangements (IVAs) or bankruptcy.

Debt management plans have several advantages over their more formal counterparts. In short, these plans are informal deals made in writing between you and your creditors, detailing how much you are able to repay each month. Usually, your plan consolidates all your debts into a single monthly payment, which is then redistributed among your creditors.

While you can draft up a debt management plan alone, it is wise to have a third party – ideally an independent financial adviser – draw up one for you. They can help you work out your budget realistically, taking into account your current level of debt, your income and all other outgoings. This will give you an indication of how much money you can afford to repay each month.

This type of plan is best for those who have very little disposable income – and you may even find that the simple act of working out a detailed budget with a financial adviser helps you to get a grip on your spending and identify ways to cut costs.

Because of the informal nature of debt management plans, they are the least intrusive of all the options available to those who are struggling with their finances. As long as you keep up with the payments you have committed to, there will be no need to scrutinise your financial situation.

It is important to note that debt management plans are not for everyone – ideally they are for individuals who owe money to just one or two creditors and are struggling with unsecured loans. They could also be suitable if you are anticipating a change in circumstances – such as losing your job – that could make it more difficult to keep up with your payments.

If you owe a large sum of money to three or more creditors, there are other debt management solutions that may be better for your circumstances. Your financial adviser will be able to assess your situation and help you determine whether a debt management plan, an IVA or even bankruptcy is the right solution for your needs.

Source: myfinances.co.uk