Debt Management - What Role Does it Play Today?

Today, in an economic downturn, many households are facing a difficult time. So how can management help?

Debt management is designed to help borrowers who can't afford their debt repayments.

When someone asks a debt company for help, the company will (on the borrower's behalf) talk to their unsecured lenders, asking them to accept lower monthly repayments, reduce/freeze interest and/or waive charges.

It is important to understand that the creditors aren't obliged to accept any changes to the original repayment agreements.

Debt management in a recession

Today, the relatively limited availability of credit is making it harder for many people to control their debts by consolidating them.

And falling house prices mean homeowners cannot count on a steady increase in the amount of equity they own. This means they might not be able to free up money by remortgaging.

One of the benefits is that it doesn't rely on house prices and/or access to further credit, so it isn't directly affected by problems in the housing and credit markets - problems which could make other debt solutions harder and/or more expensive to obtain.

Debt management is about negotiating with lenders, explaining that the borrower can no longer afford to repay their debt as they'd originally planned, often due to a change in their financial circumstances.

Is debt management right for everyone?

Some borrowers could find they aren't eligible for debt management; for example, if they are able to keep up with the repayments on their current agreement.

It is also important to note that if you default on an original agreement by entering a plan, you will damage your credit rating for 6 years (which could affect the cost and availability of credit for that time).

Another potential downside to a debt management plan is that agreeing to repay debts over a longer period of time may increase the overall cost, due to interes t charges.

For more information on debt management [http://www.firstdebtmanagement.co.uk] and other debt solutions you should speak with a professional debt advisor.

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