By arranging to pay your creditors less money per month and probably less overall, than you originally agreed to on your credit agreement with them, they will record this on your credit file, usually resulting in the account firstly showing as arrears and then showing as a default. If some of your creditors do not agree to your debt management plan they may take you to County Court for breach of your original agreement which, if they win their case, will show as a County Court Judgment (CCJ) on your credit file. The majority of lenders (creditors) use credit files to help them make a decision as to whether to extend any finance, loans or mortgages to you. Defaults and CCJ’s will stay on your credit file for up to six years and will probably limit your ability to take out any loans or finance through out that period as well as potentially increasing the rates you will have to pay for any such products – as you may well be deemed a higher risk borrower. For home owners particularly, in a similar vane, this could mean you are unable to remortgage to a competitive plan when your current deal expires or even be unable to raise a larger mortgage should you wish to move house.
A final consideration is that should you not keep up to date with your debt management plan and meet your agreed commitments, due to the limitations placed upon your credit worthiness above, your only options left may well be an Individual Voluntary Arrangement (IVA) or Bankruptcy.
If you are unable to meet your current credit commitments and are unable to raise money to refinance them into a more affordable loan or mortgage or simply do not wish to offer security for the refinance, then debt management can be a way of paying some money back to your creditors and reducing your outgoings. It is probably better to go down this route than do nothing at all and end up in a spiraling arrears situation across all your bills, as this could end up in Bankruptcy or eviction or repossession. If you have already got various defaults and arrears, then debt management may enable you to start the process of reducing these down whilst making sure you have enough funds to pay your priority bills such as food, utilities, fuel, rent and any mortgage or secured loans.
Interested in pursuing Debt Management?
There is no specific regulation that we are aware of around the setting up of a debt management plan in terms of duty of care by the company advertising to you and these firms will take a proportion of the amount you pay into the debt management plan as fees, thereby reducing further what is paid to your creditors. Therefore it may be wise to approach your creditors individually yourself and seek their agreement to a revised payment structure, this is what the debt management companies will do in any case, so you will effectively be cutting out the middle man (and their costs). Otherwise you could use the debt help services provided by charity organisations and government, such as the Consumer Credit Counselling Service or Citizens Advice Bureau to optimise what you can achieve with the money you can afford to pay, as they will not make a charge for their services.
Debt Consolidation Loans
An alternative to debt management or an IVA is a debt consolidation loan, this is a type of loan that combines your existing loans into one. Benefits of a debt consolidation loan is that it can help you raise money to pay of your existing creditors and restructure your payments to reduce your monthly outgoing's. A debt consolidation loan may preserve your credit rating and if you need to remortgage or refinance again later you should have better deals available to you than if had entered into a debt management agreement or an IVA.
The drawbacks of a debt consolidation loan is that you are usually required to secure your loan on your home, in addition by restructuring the loan over a longer period of time you may find that you repay more over the term of the loan depending on the relative interest rates and terms involved. .
OUR TYPICAL, VARIABLE RATE IS 17.9% APR. RATES RANGE FROM 9.7% to 29.9% APR
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE
OR ANY OTHER DEBT SECURED ON IT.
Loans Secured On Your Home
Please note that Ocean Finance and Mortgages does not offer Debt Management services.