Can’t afford credit card repayments?

60% of people are worried about the cost of Christmas this year, according to a poll by MoneySupermarket.com – with half of those admitting they’re ‘seriously concerned’ about financially coping during the festive season.

For those who can’t afford to pay for everything in one go, taking out debt – by ‘putting it on plastic’, for example – may seem like a good idea. However, with many people’s disposable incomes already squeezed by rising living costs, taking on too much debt could lead to those credit card repayments becoming unaffordable – leaving the borrower with a level of debt they can no longer afford to repay as agreed.

If this is the case, a debt management plan could be an ideal approach to getting back on top of debt problems.

What is a debt management plan?

A debt management plan is a new repayment plan that is agreed with your unsecured lenders. Before your debt management plan begins, your lenders will be asked – either by you or the debt management company you’re working with – to accept reduced monthly payments that you can afford.

Debt management is available from this company.

These payments are calculated after all your essential monthly expenses – rent/mortgage, energy bills, transport costs, etc. – have been taken into account, so your repayments should never cost any more than you can safely afford.

If your lenders agree that debt management is suitable for you, they may also agree to freeze interest and charges on your debts – but bear in mind that, if your lenders don’t agree to this, making smaller payments over a longer time could be more expensive overall, as your debts will accrue interest for longer.

Making smaller payments will affect your credit rating for six years after you enter a debt management plan – but as it’s only a suitable approach if you’re already having debt problems, it’s highly likely your credit score will have been damaged already. Getting a new repayment plan in place could help to limit any further damage to your credit score.

Is a debt management plan right for me?

If you’re really struggling with your credit card repayments, a debt management plan could help you get back on top of your monthly repayments once again.

However, it’s by no means the only solution, and it may not necessarily be the ideal approach for your situation, so it’s important to discuss your problems with a debt adviser first to get the best advice for your circumstances.