Debt Management Programs - 3 Misleading Myths

Wed, 5th August, 2009 - Posted by Nash

Debt Management Programs – 3 Misleading Myths

In this post, Natalie from One Advice talks about the 3 misleading myths about debt management programs.

On the search for the right financial solutions, you may find that you are bombarded with claims of how a debt management program could help you. You need to be aware of the misleading myths about debt management program and ensure a grip on reality so you can make an informed decision.

Ethical debt advice is available, but you may have to search a little to find it! Try speaking with a full financial solutions company who offer an array of debt solutions, such as bankruptcy, debt management plans, debt consolidation loans and a repossession service, as this way you will not be pressured into a debt solution which does not fully suit your circumstances.

Debt Management Program Myth #1: Debt Consolidation Loan is the same as Debt Management

A debt consolidation loan and a debt management plan are two completely different debt solutions, but they can be easily confused. Both can help you manage your unsecured debt by offering you one lower monthly payment.

But a debt management plan is not a loan; it is an agreement between you and your unsecured creditors where you commit to making a single reduced payment to a debt management company who distribute these funds between your creditors.

Be very careful about signing up to a debt consolidation loan. Although they may offer a better interest rate and a lower payment than your current debts, the loan is likely to be secured against your home. This means that your home is at risk of repossession if you fail to keep up on repayments. You do not have the same risk with a debt management plan, as the plan should be effectively structured so you can afford your mortgage payments and priority debts.

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Debt Management Program Myth #2: A Debt Management Program means you will no longer have money worries

The Debt Management Program will not throw a wand over your finances and make it all okay. Sadly, becoming debt free requires a little more hard work. You will have to commit to making the debt management payment so your creditors are being paid the agreed amount, therefore you will have to budget.

Debt Management Programss are designed to make your finances affordable, so you can meet your unsecured debt repayments through the plan as well as secured debts and living costs. But you will need to remain in control of your finances, and budgeting is one of the best ways to do this.

You need to come up with a budget which is manageable, realistic and affordable. Once these three key factors have been achieved, you should find it easy to live within your means.

Debt Management Program Myth #3: Debt Management Programs are not flexible & I don’t want to be tied in

Before you sign up to a debt management plan, or any financial solution, it is essential that you check the terms and conditions of the agreement so you are not signing up to something different to what you thought. Typically a debt management plan will not tie you in and you are free to cancel the plan when you wish.

Always ensure you consider the effects of cancelling a debt management plan. For example, agreements which are already in place with your creditors to freeze your interest and charges may be lost and you find that you end up further in the red.

However, one of the key advantages to a debt management plan over other debt solutions is it’s flexibility. Because it is an informal agreement between you and your creditors, it can be altered to suit your circumstances. The plan should have been tailored to your circumstances so it is affordable, but if this is not the case or your financial circumstances change, such as loss of income, the debt management company should be able to alter the plan for you.

Are there other debt management myths that need dispelling? Remember, that one of the keys to getting the right debt advice is to seek debt management help from a professional and ethical company. Debt Management is not the only debt solutions, always fully consider your options.

Photo Credits to Lipgloss Junkie

About The Author:

One Advice are one of the longest established financial practices in the UK. We offer a full range of solutions, all under one roof, so we can ethically advise our clients as to which financial management solution is their best option.
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