Debt Management Companies UK - Which One Would be Best for You? Analysis, Review, FAQs & More
Finding yourself in debt can be very overwhelming. It’s a situation which a lot of people get perpetually stuck in.
If you’re in debt, it’s highly important to get the right guidance and find the right information which can help you get out.
This is where debt management companies come in.
While there are definitely some great debt management companies in the UK which can help you; there are others which are not so great and may land you in a worse situation than you were initially in.
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How does Debt Management Work and how can a Debt Management Company Help Me?
If you opt to go to a debt management company for help, then they’ll help you pay off all your debts by developing a manageable payment plan for you.
They will do this by:
- Gathering a list of all your creditors, calculating how much debt you owe to each of them as well as calculating your total debt.
- After this, they will ask you for complete details about your monthly income and expenditures. They will use this information to determine what your spare income is each month.
- Depending on how much spare income you have each month, they will develop an affordable and manageable plan. This includes determining how much of your spare income goes to each of your creditors each month.
- Once the payment plan has been devised, the company will contact each one of your creditors and inform them that you are considering entering into a debt management plan. They will present your creditors with the debt management plan and ask them to freeze all interest and charges on your account. If all of your creditors agree to your plan, it will be put in place and you will start making your monthly payments.
How Are My Payments Divided Among Creditors?
The portion of money that each of your creditors gets each month depends on how much debt you owe to them with context to your total debt.
For example, say that you have a total debt of £10,000 with 3 creditors. You owe the first one £5,000, the second one £3,000 and the last one £2,000.
Your monthly spare income is £1,000. Then, you would be paying this £1,000 as part of your debt management plan each month with £500 going to the creditor 1, £300 going to creditor 2 and £200 going to creditor 3.
How Long Does a Debt Management Plan Last?
Your debt management plan can vary in duration as it depends on a number of different aspects such as how much money you owe, how much spare income you have each month, how many creditors you have, etc.
Typically, debt management plans last anywhere between 2 to 8 years.
Debt Management Companies UK
With a large majority of the population opting for personal loans without any thought-out plans on how to repay them, many people are finding themselves drowning in debt.
As a result of this, many debt management companies have started popping up in the UK.
It can definitely be a good idea to get debt advice from a professional but it’s important that you seek this advice from a firm that is qualified and has your best interests at heart.
When you’re looking for a company to manage debts, it can be difficult to tell whether a certain company would be a good fit for you or not.
The first thing you should be on the lookout for is that the company is completely transparent about their charges and fees. If a company is surprising you with hidden fees and additional charges, they’re not trying to get you out of debt, they’re trying to keep you in it.
Secondly, it’s important that you seek debt advice from a debt management company that is understanding and sympathetic.
Their representatives should be individuals who understand that managing debts and dealing with them can be overwhelming and confusing. Accordingly, they should be dealing with you in a friendly and sympathetic manner.
If you approach a debt management company and are met with a representative that’s cold and gives unclear answers, you should think twice about entering into a debt management plan with them.
Thirdly, it’s extremely important when looking for debt management companies that you only deal with companies that are authorised and regulated by the Financial Conduct Authority (FCA).
This is because the Financial Conduct Authority has guidelines put in place which ensure that you are treated fairly.
It also helps you steer clear of companies which are operating illegally and might be trying to take advantage of your vulnerable situation.
Hence, always ask for their credentials before entering into any type of agreement with them.
You can choose to get help from free debt advice services or you can get help from a private debt management firm which charges you a fee as well.
I’d highly recommend getting free debt advice rather than paying a private debt advice service that charges you a fee.
While many people believe that private debt management firms offer better advice and suggestions, I don’t believe that this is the case.
Also, it isn’t particularly a great decision to opt for a debt management company that charges you money for their services when you’re already in debt.
Free debt management companies will give you free debt advice and help you throughout the entire DMP process. You can also contact these companies for help and information regarding other matter pertaining to debt as well.
If you’re having trouble determining which company to go for, have a look at our list of debt management company reviews. They’re sure to help you understand how these companies work and which one would be most suitable for your needs.
Debt management companies can definitely help you immensely by providing you with the tools and information necessary to get out of debt.
That being said, finding a good firm that will be effective in helping you take care of your debt is easier said than done.
I hope you found this information useful. If you have more questions, feel free to ask.