If you have a mortgage, credit cards, bills or loans and are worried about how much you owe you can take a debt test to see how difficult it might be for you to manage your borrowing over the next twelve months or so. A confidential debt test asks you some simple questions such as what debt you owe, how much money you have coming in and your current home circumstances.
A debt test will then indicate whether you should be concerned about the amount you owe and can offer you a way to deal with the debts you have if you are in financial difficulty.
Should the debt test reveal you have debt problems you will be able to look at your options, including a debt management plan. This involves debt management companies negotiating with creditors to change how you repay your debt. This can be a good solution to managing your debts, especially if the problems you are experiencing are going to be short term. The aim of the DMP is for the debt management companies to handle all negotiations with your creditors, to reduce the monthly repayments you have to make and try to stop any legal action. You have to be able to afford to pay £100 each month although in some cases it can be reduced to £80. This money is then distributed to your creditors on a proportionate basis. There is a fee involved when using a debt management company although this is worked into the payments you make each month.
It is worth noting that a Debt Management Plan isn’t a loan. The money you pay isn’t to the debt management company it is just to pay off your debts directly. A DMP is a solution that allows you to repay your debt at a monthly rate that you can afford. If you don’t make payments into the plan, your creditors won’t be paid.
Another debt management plan is self help debt management. This is different from using a debt management company as you negotiate yourself with your creditors. This is ideal if your debts aren’t too serious and you approach them as soon as you start to struggle with your repayments. It is much more advisable to do this than to wait until they threaten legal action as they will be more likely to negotiate a deal or will refer you to a debt management company.
A debt test should be your first step in addressing your financial concerns. Whatever you decide to do make sure you do your research as some debt management plans last more than 10 years and can often reduce debt by quite small amounts.