Many people who are in debt try to deal with their debt and pay it off by themselves. However, it often happens that if you’ve managed to get behind with payments on credit and store cards and spent up to your overdraft limits already, then even though you might be really motivated to deal with your debt, the reality of managing it is sometimes overwhelming.
It’s at this point that people decide to get some professional assistance, and the first step is to have a consultation with a debt management company. Depending on how much you owe, the first course of action they may offer is usually a debt management plan – otherwise known as a DMP.
Using a Debt Management Plan
In essence, this is where the debt management company looks at your monthly income and outgoings and agrees with you an amount that you can put towards paying off your accumulated debts each month. Then, instead of making those payments direct to the creditors, you make a single monthly payment to the debt management company, which redistributes it amongst your creditors on your behalf. As they work on a daily basis with different creditors, debt management companies can often negotiate interest rates and freeze any further penalties once a debt management plan is in place.
Reasons Why a Debt Management Company May Help You More
Working your way out of debt with a debt management plan can take a lot of the stress of being in debt away, especially as you’ll have a middle man between you and the creditors you owe money. It also lifts a lot of the administrative hassle from your shoulders – as long as you keep up the monthly payments. They send you a monthly statement, breakdown of how your creditors are being paid and even at what interest rate they are paying them back.
Of course, it’s not the only solution to debt clearance. If your debts are more significant, you may be advised to take out a debt consolidation loan or even apply for an IVA (Individual Voluntary Arrangement) – which is the next step before declaring bankruptcy.
Before going ahead with any financial service, you should always make sure you seek independent financial advice, but if the DIY approach to debt management hasn’t worked for you, it’s definitely worth looking into getting some professional assistance.
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