Debt Management Plans

Debt management companies are different from debt consolidation companies. Instead of offering a loan, debt management companies offer to reach agreements with creditors and provide a channel for the money you can pay to your creditors. A debt management plan allows you to either reduce your monthly payments for a temporary period or until the full debt has been paid off. The agreed amount is based on an income and expenditure form that calculates your surplus monthly income. A debt management company will do all the hard work for you and talk to your creditors on your behalf.

You must be extremely careful when choosing a debt management company as many of them will charge a fee for their service? often one month's total repayments and then a percentage of subsequent payments as well. To make sure that you are getting a good deal, it may be wise to discuss the offer you have received with your local Citizens Advice Bureau, Payplan or FCL debt clinic (see Useful Resources for a list of contact information).

We've compiled a list of our top ten Debt Management Companies for you to check out.

The Good and the Bad

A debt management plan has many advantages, for example: you will only have to take care of a single monthly payment; your payments will be assessed frequently so that you will always be able to afford them and you will not have to deal with your creditors.

However, since debt management companies do now draw up contracts with your creditors, they are not obliged to agree with the new re-payment structures.

If you are only able to afford small repayments each month, to cover a large amount of debt could take you a long time. In these situations, another solution may be more suitable. Please contact your local Citizen's Advice Bureau for advice.