Thursday, November 4, 2010

Personal Loans : Debt Management

There are many reasons why individuals, partners or families often end up in debt. For those who are unfortunate enough and find themselves in the situation that they can no longer afford repayments on existing loans and credit cards, there are some options worth exploring. It is worth noting however, that the law is different in Scotland as opposed to England and Wales and independent financial advice should be considered from organisations such as the National Debt Line

( or Citizens Advice Bureau)


Depending on the applicants circumstances some organisations offer Debt Management plans or (DMP’s) as they are otherwise known as. So what are these? In simplistic terms a debt management plan calculates what you can afford to pay creditors each month based on your income, outgoings and expenses. The new repayment amount based upon what you can afford is then paid to the Debt Management company who negotiate with your existing creditors to accept the lower repayment and freeze the interest.

This approach to tackling debt is not appropriate to everyone and the disadvantages are that some Debt Management Companies or IVA practices (Individual Voluntary Arrangement) charge fees for this service, creditors are not legally forced to accept the terms offered by the debt management company. In addition it could take many more years to pay off the debt.


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