Debt Management FAQ(Detailed)

Managing your personal debt can be a daunting task and a lot of people find the debt to be very stressful. Debt management companies and charities are there to provide you with a helping hand to such people. Debt management helps to manage debt as well as allows you to have enough money to manage your daily expenses. Answers to FAQs or frequently asked questions are also found on many of the company’s website. If you are still left with some question you can take advice from the debt management expert.

Some of the frequently asked questions and their answers are mentioned below:

  • Is debt management plan for everyone?
    If you have an unsecured loan like credit cards or overdrafts and have been struggling to pay them then debt management plan will definitely help you. They will help you negotiate or do themselves to reduce your monthly repayment making it easy to pay your debt and clear it. The debt management companies will ask you to pay single monthly payment to them which they will distribute it to different creditors. The companies may ask for a management fee for the same. However, some debt management charity will do it for free.
  • Debt management plan, how does it work?
    Debt Management plan is offered by some company or charity. They are the third party who goes about negotiating with your creditors to let the repayment being made to be reduced. The creditor and the company negotiate among themselves and agree for a lower repayment. The borrower needs to pay a payment to the company once in a month and they will distribute it to different creditors. The lenders do not have obligation to receive lower payment from you but will do so if they see that you are doing your best to pay back the debt. They may also freeze the interest and charges on the debt which is not necessary though. Only drawback is that paying the debt slowly can affect your credit file for 6 years as you are not paying the original repayment amount.
  • The debt management plans lasts for how long?
    The money that you may have to spend on debt management plan will depend on the amount that you have as unsecured loan and also on the amount that you can pay back every month. Sometimes you may need to be with the debt management plans till the time you pay back the entire debt. If you can afford to pay more every month the debt will get over soon. You need to check the situation regularly so that you can make more of the payment or need to speak to your creditor to accept still lower payment. The lender may accept it just to get back the loaned amount.
  • Do the creditors freeze the interest or charges if I go for debt management?
    Not always, but yes, most of the creditors do agree to freeze the interest applied in your debt or any charges that may apply. This is more problematic when they do not agree to do so as it will increase the amount that you pay back to them as the duration of payment is increased. To save you from this many of the companies try to negotiate so that your creditor agrees to freeze the interest applied or any charges that may apply.
  • Can I add all my creditors to the debt management plans?
    Yes! You may add all your creditors with unsecured loan to debt management plans. However, certain debts with huge penalties may not be covered under debt management plans, like that of your home repossession.
  • How will I know that payment is being made regularly?
    Most of the debt management companies provide you with statement of your repayment to different creditors. However, many of them also provide you access to the internet service where you can check with the payments on your own at your own convenience.
  • Is debt management plans a type of loan?
    The debt management plans are not a loan as in this the company looks for ways to pay back your debt and they do not lend any kind of money.
  • If the repayments are not done regularly what will be the consequence?
    If you have been using debt management plans then your repayment amount will already be very low. However, if your situation has changed due to any reason then you can afford to pay even the reduced amount then you may get in touch with the company for still reduced payment. The company may negotiate with your creditor and alter the amount that you may need to pay them.

Debt management plans are a great relief for people under debt and can be availed at a nominal fees or even free of cost.