Debt Management: Should I tackle my debts on my own?

If you are struggling to keep up with your debts, then a debt management plan may be the right solution for you.

Debt management can be done in different ways: on your own, or on a debt management plan organised through a professional debt management organisation.

However, there are a few things you should consider before you contact your creditors – or ask a debt management organisation to do it for you:

• If you default on your original repayment agreement, this will show up on your credit rating for 6 years, which could affect the cost and availability of credit.
• By agreeing to pay your debts back over a longer period of time, you may increase the overall amount you have to pay (due to interest).
• Creditors are not obliged to accept new repayment terms or stick to them once they’ve agreed.
• And finally, lenders won’t agree to accept lower payments unless you can’t afford to make the agreed repayments of your current debts.

If you choose to ‘go it alone’, there are several things you will have to do. For example, you will have to negotiate with your unsecured lenders, and ask them to allow you to repay your debts at a more affordable rate. This can be a stressful process, but it may pay off as lenders could accept new lower monthly payments, freeze interest and/or waive charges.

If you choose to talk to a professional debt management company about your debts, they could do this on your behalf.

So – should you tackle your debts alone, or should you seek professional help?

The professional way…

If your debts have become unmanageable, you may wish to contact a professional debt management organisation.

Although this may incur a fee, there are certain advantages of letting experienced debt professionals manage your debts. To name a few:

• It’s not their debt - Debt management professionals won’t be emotionally involved. If you were to deal with the debt yourself, it could be a stressful experience.
• It’s their job – Managing multiple debts to multiple lenders on your own is no easy task, but debt management professionals are used to it. They should know how to fill in the paperwork, how to negotiate, etc.
• They understand debt - Debt management professionals are experienced in the different types of debt people have, so you can be confident they’ll understand yours! They may have worked with many lenders before, so they should know what sort of proposals they are likely to accept/reject.

Your own way…

Despite the help available, some people still prefer to remain ‘in the driving seat’. If you choose to handle your finances yourself, you will save yourself the fee that some debt management organisations may charge you.

If you choose to do it on your own, just make sure you are confident about negotiating with your lenders and prepared to deal with the phone calls and letters.

If you want more information on debt management, you could either research the solution for yourself or contact a professional debt adviser, who could talk you through the process.