Pay Off Multiple Debts With A Debt Management Plan
By the time many people realise they have a problem with debt, they will owe money to a number of lenders. Being in debt to several lenders can be very worrying, especially if you`re receiving letters and phonecalls from all of them because you can`t afford the full monthly payments.
If you`re in this situation, you`re certainly not alone. Many thousands of people get into trouble with their debts every year. A lot of them find help in the form of a debt management plan: an agreement that reduces your unsecured debt repayments to make them affordable.
How a debt management plan works
A debt management plan is an informal arrangement that must be agreed in advance with your lenders. Your lenders must accept any payment you make towards your debts, but unless you have an agreement in place they may be more likely to take action against you if you don`t keep up with the repayments you originally agreed.
So before your debt management plan can start, you`ll need to negotiate the terms. In a debt management plan, repayments to each lender are normally based on how much you owe to each as a proportion of the overall debt – so if you owed 30% of your unsecured debt to two lenders and 40% to a third, you`d offer to contribute this amount of your available income to each respective lender every month.
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