Debt Management ñ How is the Nation Paying off Debts?

Latest research from a leading debt charity reveals the average debtor faces a monthly bill of £675.52 to meet repayments.
 
The Consumer Credit Counselling Service (CCCS) shows the average person contacting them for help on managing their debts owes a total of £22,476 on credit cards, personal loans, overdrafts and other unsecured debts.
 
They estimated the majority in this situation have to work until 4pm on Wednesday each week just to earn enough to repay these debts, if based on the average income of their clients.
 
ìWith rising prices continuing to push up the cost of living, household budgets are under increasing pressure ñ and these figures show how difficult it can be to escape from debt once it builds up,î said Delroy Corinaldi, CCCS external affairs director.
 
Debt management companies
 
Debt management companies have come under scrutiny recently, as an Office of Fair Trading (OFT) report revealed many charges attached to debt management plans were to consumer detriment.
 
The report followed a super-complaint by Citizens Advice, and found initial arrangement fees charged by debt management companies are implemented to ensure the plan is successfully completed.
 
Debt Solutions
 
These mal-practices are not making it easy for those in debt to handle their repayments, and as such consumers are urged to think carefully if a debt management plan is right for them.
 
Take a look at these tips:
 
ï Debt management plans can make it easier and less stressful for the debtor to repay what they owe.  A debt management loan will clear the debtorís debts and so they only have to pay one monthly payment.
 
ï While the debtor does not have to worry about interest racking up on each individual debt, and need not worry about being chased by their creditors for late payments, the loan on the debt management plan will acquire interest and so the debtor will end up paying back more than they originally owed.
 
ï The advantage however is they can spread this cost out over a long period of time to make the monthly payments more affordable for their current budget.
 
ï Credit ratings are usually affected if a debtor takes out a debt management plan, however if they stick to it and pay off what they owe then they will be in a good position to start rebuilding their credit rating.
 
Comparing debt management plans:
 
ï Compare the market for the best debt management plan for your specific needs.
 
ï Consider securing the loan.  If you have a mortgage you can usually secure your debt management plan to this so you can receive a better rate.
 
ï You will be asked how much you need to borrow, the length of time you will want to have to pay it off by, the purpose of the loan, if you have a mortgage, and your credit history, to work out your eligibility for the loan.
 
ï Due to this, it is not always best practice to opt for the debt management plan with the best advertised rate, as this is an average rate and when calculated for your situation may be lower or higher than this.

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