Debt management is a way to lower your monthly payments on your unsecured debts – such as credit card balances, an overdraft, a personal loan, or a Hire Purchase agreement – if you’re struggling with your existing payments.
Debt management can’t lower your mortgage payments, however – you would need to speak to your mortgage provider (who may be able to give you a temporary ‘payment holiday’ until your circumstances improve).
If you cannot afford your mortgage payments because of unsecured debts, and you enter into a debt management plan, your mortgage will be considered a priority over other forms of borrowing. This means you could reduce your unsecured debt repayments to help you afford your mortgage, if you’re really struggling.
What is debt management?
Debt management is an informal agreement with the people you owe money to, where you agree to pay back what you can afford every month towards all of your unsecured debt.
You’ll only qualify for debt management if you’re already struggling to repay what you owe every month. This could happen for all sorts of reasons – perhaps you’ve had a change in circumstances and can’t manage your payments anymore? Whatever your reason, there are people who can help.
Lenders would only agree to lower payments if they knew you could afford to repay what you owed within a reasonable amount of time – they don’t have to agree to it at all.
While debt management has helped many people out of a difficult situation, there are consequences. Lowering the amount you repay every month damages your credit record – making further borrowing more difficult for at least three years. And you may end up paying more interest overall, as you’ll be paying it for longer.
However, debt management can be flexible, and if your circumstances improve enough you will return to repaying your debts as normal.