Debt management plans – can someone please explain?

I’ve been hearing a lot of about debt management plans lately and how they are touted as a cure for the ills of people in debt. Taken at face value the debt management services on offer sound great – take all your loans, credit cards, overdrafts and store cards and turn them into one easy to afford single monthly payment. Wow this sounds great – that is until you dig a little deeper.

How it works

You as a potential customer contact a debt management company. The debt management company will ask you for information in relation to your debt, your monthly income and your day to day expenses. The debt management company will devise a plan for you based on your monthly income and on the amount of unsecured debt that you have.

Please note that the debt management company can only devise a debt management plan for you in relation to your unsecured debt, this includes credit cards, overdrafts, store cards and personal loans. Mortgages and car loans will not be covered by the debt management plan. Straightaway this is what I would regard as a negative since you will still have the monthly car loan and mortgage payments on top of the debt management plan payment.

Ok so the debt management company has the necessary information about your debts and your income. The debt management company calculates and agrees a realistic monthly payment that you can make to pay off your debts while at the same time allowing you enough money to pay for your day to day expenses.

Once you have agreed the monthly amount the debt management company will approach your creditors looking for...

Learn more here: http://www.untildebtdouspart.com/2008/04/23/debt-management-plans-can-someone-please-explain/

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