When you find yourself dealing with worry about debt, you might be wondering what the best step to take is to start getting yourself out of this challenging situation. Debt management plans are a useful tool that a debt recovery agency can support you with and can help to take your finances to a more secure place. Our team is here to support you with any debt recovery concerns you have and work to make this year your most successful one yet as a business owner or individual. Keep reading to discover what is a debt management plan and when and why you would consider using this tool.
What is a Debt Management Plan?
A debt management plan can be used for many reasons and is an option that’s on offer for both businesses and individuals. If you are struggling with late payments of commercial debts or credit card bills, this could be a way to make yourself more financially secure in the near future. Debt management plans are an informal agreement that’s put in place between you and creditors who you owe non-priority debts. These are debts like loans and credits cards, as opposed to your priority debts like your rent and essential household bills. You will then pay a monthly sum to the debt management plan owner, as opposed to paying each card or loan off in small amounts every month and potentially not reaching the minimum threshold for each one.
This plan will be management by a DMP provider who will then take over the contact with the people or businesses you have accounts receivable overdue with. It stops you from having to deal with difficult situations and conversations and may minimise the overdue payment letter communication you receive. One important thing to keep in mind about this type of plan is that it’s not legally binding. There’s no minimum time period for the plan, so if you feel you need to cancel it, or you suddenly find yourself in a better place financially, you’ll be able to cancel the plan.
Who Can Benefit from a Debt Management Plan?
As with any type of financial service, a debt management plan is going to be a good option for some people and not so suitable for others. It’s typically a sensible option if you know you will be able to afford the monthly repayments on your priority debts but are just struggling with these additional debts. We also recommend this solution if you find yourself very stressed out when dealing with creditors and the communication you’ve had with them so far. By creating this one monthly bill instead of lots of smaller payments, you may find it easier to focus on getting rid of your debt and putting yourself in a better situation financially.
On the other hand, we don’t recommend this option to anyone who can’t even pay their rent and basic household bills each month. These are the bills you need to focus on in order to have a place to live, and then you can work to get rid of your other debt. It may take longer to pay back your debt with a debt management plan, as you may also be charged a fee each month for this service, and it may be added to your credit record after using this service. Always read the small print very carefully on any documents you are signing to avoid issues in the future or a long-term negative impact on your financial situation.
How to Create a Debt Management Plan
If you’ve weighed up the pros and cons of a debt management plan and think it’s a good option for you, then you’ll want to work with a debt recovery agency that offers this service. Make sure you focus on how you will pay off your priority debts first, then you can set up this plan for your other loans and credit cards. Create a monthly budget to realistically see how much you’ll be able to pay off with your monthly payments and choose a DMP provider that offers you the terms and conditions that suit your needs. Make sure you read over the contract very carefully before signing it and then do all you can to ensure you meet these payment deadlines each and every month until your debt is gone.
There are many benefits of debt management plans for individuals or businesses that find themselves in a difficult financial situation. Our team will be here to discuss any questions you have about this financial solution and see if it’s a good option for you based on your personal situation. Contact us today to learn more about the services we offer or to take the first steps towards setting up a debt management plan and getting your finances back on track this year.
Read the next article: Credit risk management: What is it and why it matters