Advantages and disadvantages of debt management

Debt can easily get out of hand, and may become unmanageable more quickly than you thought possible.

A debt management plan could allow you to make one affordable monthly payment that reflects your financial situation, bringing your finances back under control.

However, it is important to understand whether or not a debt management plan is really right for you, so we will now take a look at some of the advantages and disadvantages of debt management.

Bear in mind that debt management plans are available from various financial organisations, and different organisations may operate in different ways.

Advantages

• On a debt management plan, you could reduce your monthly outgoings and make just one monthly payment, based on what you can afford today, rather than what you could afford when you took on your debts in the first place.
• Debt management plans can be flexible. If your circumstances change and you start finding payments difficult to make, then your debt adviser may be able to re-assess your situation and negotiate with your creditors again, asking them to accept lower monthly payments.

Disadvantages

• Your debts could take longer to pay off as you are repaying smaller amounts each month. Also, the interest could cost you more in the long run, as you are repaying your debt over a longer period of time.
• Your creditors aren't legally obliged to accept any new repayment terms. However, if they believe that agreeing to the new terms is the best way of getting their money back, then they are likely to agree.

If you want further information on debt management (or any other debt solution, such as debt consolidation or IVAs (Individual Voluntary Arrangements)), then you should speak to a professional debt adviser.