What is debt management?
June 13th, 2011 -- Posted in Debt Consolidation | Comments OffA debt management plan is a debt solution for people with unmanageable debts. It works by reducing the borrower’s unsecured debt repayments to an affordable level, leaving them with enough to cover their other essential expenses.
In many cases, interest and charges are also frozen, preventing the debt from growing. This can reduce the amount the borrower has to pay overall, and the time it takes to fully repay the debts.
Lenders are under no obligation to agree to any of this – but may well do so if it’s clear the borrower can’t afford to repay their debts by as they originally agreed.
A downside of a debt management plan is that the borrower’s credit rating will be damaged, because reduced repayments are recorded on the borrower’s credit history. And if interest and charges aren’t frozen, the borrower may end up paying more in the long run.