What is a debt management plan and how can it help?

In short, it's a new repayment plan for people who can't afford their debt repayments.

It helps by reducing the amount you pay towards your unsecured debts each month, leaving you with enough money to cover your other essential costs, such as bills and secured debt repayments (e.g. your mortgage).

Do I qualify for a debt management plan?

You will be eligible for a debt management plan if you meet certain criteria. In particular, you must be unable to meet your existing debt repayments. However, you must still be able to make some contribution towards your unsecured debts each month, and you should still be able to repay those debts within a reasonable timeframe.

Even if you can say 'yes' to all of the above, your lenders aren't obliged to agree to anything - but if you really can't afford to repay your debts as they are, it's quite likely that they will agree to an alternative repayment plan.

How long will a debt management plan last?

In general, a debt management plan lasts as long as it needs to. The whole idea is that it enables you to repay your unsecured debts at a pace you can manage.

Just keep in mind that because your monthly payments will be lower, it'll take longer to repay your debts. How long it actually takes will depend on how big your debts are and how much you can afford to pay every month.

What happens if I have trouble with my payments?

From time to time, you may come up against unexpected costs that make it difficult for you to meet your debt management payments. Lenders understand that, and as such you should be able to take a short break from payments if absolutely necessary.

If it looks like your problem is more long-term, it may turn out that your debt management plan is no longer your best option. If so, we can help you find a more suitable debt solution.

Can it help me with all my debts?

Yes. Although a debt management plan only reduces your unsecured debt repayments, it's designed to ensure you can still afford your other living costs, including your priority secured debt repayments. In that sense, it can help with most types of debt.

Are there any disadvantages?

All debt solutions have some disadvantages. In the case of a debt management plan, your lower monthly payments will be reflected on your credit history, including the missed payments, when you pay your initial fee, which will affect your credit rating. And if your lenders don't agree to freeze interest and charges, you could end up paying more in the long run.

Just remember that despite these disadvantages, not getting the help you need could have even more serious consequences in the long run.