Thinking Money | Free Financial Advice and Tips

Debt management plans – do I need to be a homeowner to enter one?

Posted on 05. Mar, 2010 in Loans and debts

If you are in debt, the solution to your problems will depend on both your immediate and long-term circumstances. There are a number of debt solutions that could be appropriate for you, and there are a number of things that could affect the suitability of each debt solution for you, such as your income and outgoings, the amount of debt you are carrying, your ability to repay your debts, amongst other things.

A professional debt management plan is no different. If you think debt management may be appropriate for you, you should speak to a professional debt adviser to ensure you are fully aware of the impact it will have and to make sure it is the best solution to your debts.

What is a debt management plan?

A debt management plan is, in short, an informal debt solution in which you will agree to repay your unsecured debts in smaller monthly instalments, based on an amount you can realistically afford once your essential costs (mortgage/rent payments, day-to-day living costs, utility bills, etc.) have been covered.

On a debt management plan, you may be able to have interest on your debts either reduced or frozen – which will prevent your debt from growing too much while you’re repaying it.

Note that repaying your debts more slowly can add to the overall cost of repaying them, and can damage your credit rating.

If you would prefer to remain in direct control of your debts, you can arrange a debt management plan on your own by negotiating with your creditors directly. However, this can be a stressful experience, and could take up a lot of your time – and that’s one of the reasons why many people prefer the convenience of letting a professional debt management company handle their debts for them.

So, do I need to be a homeowner?

You don’t need to be a homeowner to enter a debt management plan. You do need to demonstrate that you cannot afford your current repayments, but are still able to commit to making regular reduced monthly payments.

Regardless of whether you are a homeowner, you should think seriously about whether debt management is the best option for your debts. On that note, you should always consider all your options before you commit to any kind of financial plan.