Debt Management Loans

Introduction To Debt Management Loans

A Debt Management Loan also known as debt management plan (DMP) is an agreement which helps a person repay his/her unsecured debts by making a payment which is more affordable to their budget once a month via a third party company.

The unsecured debts may include:

  • Credit cards
  • Bank overdrafts
  • Personal loans
  • Outstanding balances
  • Business loans that you are personally liable for

Usually the debtor has lost power of control over their debts Ė payments take up almost all of their monthly income and can not be paid regularly. The Debt Management Company will then assess the debtors expenses compared to their income, and re-negotiate rates with the creditors. The debt management company should also speak to the creditors to make sure as long as the debtor repays their debt on a monthly basis, they will not take any court action against them to recover their debts.

Payments continue to be made and only end when the debt is fully cleared or until the debtor is able to make repayments at the original price again. Repayments are decided by working out what the debtor can realistically afford on their income after taking off important expenses such as rent, bills etc.

Anyone can request a DMP. It can be an individual or company who:

  • Cannot repay their creditors regularly and on time.
  • Whose outgoings and vital monthly payments such as rent and bills are more than their monthly salary.
  • Is declared bankrupt.

Managing Your Debts - A Debt Management Programme

A debt management program is simply a way of managing your debts through a well designed program. It works making one manageable payment by merging all of your current loans together. The debt manager will then negotiate a plan with your lenders to see how much they will allow you to pay. A Debt management plan is not a loan, in many it may require another loan to consolidate and manage all existing loans. Most debt managers will ask you to opt in for a consolidation loan to be able to repay your creditors.

Debt Consolidation Loan

Debt Consolidation is the act of combining several loans or debts into one low payment which offers two financial pluses: a lower overall interest rate and simplicity. Itís a way to merge your debts into one loan and one affordable monthly sum. The magic of being debt free is being wise with your money; that is the only solution.

Advantages Of A Debt Management Loan

  • A debt management plan will reduce the monthly payments that the debtor has to make and make them more affordable to the individual.
  • The debtor will not have to speak to anyone but the DMP until their loans are repaid.
  • The interest rate is lower than with a normal loan.
  • You only have to repay what you can realistically afford.
  • Your financial situation is re-checked on a regular basis so that you donít end up paying more than you can afford.
  • The DMP Company makes payment to your creditors monthly.
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Debt Management Loans