A debt management plan is just one of the solutions a financial organisation may offer.
Depending on how the organisation operates, it may involve making one monthly payment to your personal debt adviser, based on how much you can realistically afford.
This sum would then be divided amongst your creditors as agreed, according to how much you owe each of them (this is known as a pro rata payment).
As with any debt solution, debt management has its pros and cons.
You may find that a debt management plan is not suitable for you, but that a debt consolidation loan (for example) might be.
We will now take a look at the potential pros and cons of debt management, to help you decide if it may be the right debt solution for you.
Pros 1.
Lower your monthly repayments.
With a debt management plan, you could potentially reduce your monthly debt repayments to one affordable sum.
This would be based on what you can realistically afford according to your financial situation today - not your situation when you took on your debt in the first place.
2.
Bring some flexibility to your finances.
If your circumstances change and the repayments become difficult to make, your debt adviser can re-assess your situation and may be able to negotiate a new lower rate of repayment with your creditors.
Cons 1.
Your debt will take longer to pay off.
As you will be repaying your debts in smaller monthly amounts, it will take longer to repay them.
This means the debt will be a burden for longer.
2.
It's an informal agreement.
A debt management plan isn't legally binding, which means there is no legal obligation for your creditors to accept the new terms of your agreement (or stick to them).
In most cases, however, creditors may accept the terms if they think that it is the best way of getting their money back.