How long will my debt management plan last?

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For people who can’t keep up with payments to their unsecured debts, a debt management plan can be the best way forward. It can make their payments affordable again, simplify their finances and take away a lot of the stress that debt problems can cause.

If you’re thinking of debt management as a solution to your debts, one of the questions on your mind is probably “How long will my debt management plan last?” There’s no straightforward answer to this, as everyone’s situation is different – it depends on how much you owe, how much you can afford to pay every month, whether or not your lenders agree to freeze or reduce interest and other charges…

To find out if debt management will be suitable for you check out this debt management calculator.

Why are those factors so important? Basically, a debt management plan involves asking your lenders to accept lower monthly payments that reflect what you can realistically afford after you’ve paid for your mortgage/rent, utility bills, food and other essential costs – depending on your situation, this figure may have changed drastically since you took on those debts in the first place.

They’re not obliged to agree to this, but if they think it looks like the best way for you to repay the money you owe, they’re likely to agree.

Once your debt management plan is up and running, it can go on until your debts have been cleared altogether, or it can go on until your situation improves and this means you can start making higher payments again. Bear in mind that a debt management plan isn’t legally binding – and your creditors aren’t obliged to go on accepting lower payments right up to the day your debts are paid off.

If your situation improves while your debt management plan is in progress, you may be able to pay more every month – if you can afford this, your creditors will expect you to, and it does mean you’ll be clearing your debts more rapidly. On the other hand, if your situation gets worse while you’re on your debt management plan, they may be prepared to start accepting lower payments if that’s all you can afford. If you’re on a professional debt management plan, your debt management company can talk to them on your behalf.

Please bear in mind that repaying a debt more slowly can damage your credit rating, whether or not you actually join a debt management plan. Any one of your lenders may choose to issue a default notice since you’ve not stuck to your original agreement with them – and if you want to borrow money while this is still on your credit report (i.e. in the next six years), this can affect your chances of finding a lender who’ll lend you money. Having said that, if you can’t stay on top of your payments to your debts, your credit rating may already have been affected.

If your lenders agree to freeze interest and charges on your debt while you’re on a debt management plan, this can really help you – your debt won’t be growing while you’re focusing on paying it off. If they don’t agree to this, note that repaying a debt more slowly will mean it has longer to accrue interest, so it can cost you more to clear.

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