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Understanding Debt Management Plans.... Benefits & Disadvantages

There are a number of benefits in using a Debt Management Plan if you are struggling with mounting debts. However it is important to remember that there are some drawbacks as well.

  • You'll only pay what you can afford each month.
  • In some cases interest will be frozen.
  • You won't have to deal with creditors, we'll do that for you.
  • We can support you should creditors contact you.
  • You needn't tell your family and frieds if you don't want to.
  • We will review your plan if your circumstances change.
  • It's not a legaly binding agreement.
  • We cannot stop creditors contacting you.
  • Your debt can still get worse.
  • It can take a long time to complete a management plan.
  • It will affect your credit rating.
  • If interest isn't frozen it can continue to build up.

Would you like to talk to somebody first?

Throughout the process one of our trained debt advisors will always be available to talk through the various solutions we can offer and answers any questions you may have

Dealing with Debt - 5 Things You Should Know

  1. There are sources of free debt and advice services. Contact the Money Advice Service on www.moneyadviceservice.org.uk/en/articles/where-to-go-to-get-free-debt-advice or 0300 500 5000 (8-8 Monday - Friday, 9-1 Saturday).
  2. You should have been advised on all options for dealing with debt. Protocol compliant providers will explain all the options that are open to you (e.g. bankruptcy, debt relief order, individual voluntary arrangement, debt management plan). The advantages and disadvantages of each will be discussed with you so you can make an informed choice.
  3. You will know the estimated total cost to you of the arrangement and the time it will take for your debts to be paid. Protocol compliant providers will always give you this information. If your provider does not you must ask to find out. Any money you pay to your provider to cover their fees will not be used to repay your debts. Think carefully if more money is being used to pay your providers than your creditors.
  4. Your provider will go through a full and accurate budgeting process with you. This is vital to make sure that the payments you are asked to make are affordable for yourself and fair to your creditors.
  5. If you are not happy with the service you recieve, you can complain. You should refer such complaints to the provider first to give them a chance to put things right. They should tell you clearly how to do this. If they are a member of the DRF or the DEMSA they will also tell you how to use their own concillation and complaints scheme as a second step. You can be repaid any fees charged and may be awarded compensation by these schemes. If you are still not happy with the outcome, you can complain to the Financial Ombudsman Service (www.financial-ombudsman.org.uk/) which is an independant service who will look into your complaint and can award you compensation if they decide in your favour.
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