Debt management plans

Definition

A debt management plan is a way for those struggling to make their repayments on a finance package to ensure they do not get into too much debt and end up missing payments or even defaulting.

What is a debt management plan?

If you are struggling to make your regular monthly finance payments, then you should look at setting up a debt management plan with your finance provider. This plan will allow you to look at the total amount you have left to pay and what the monthly payments are currently set at,  and then allow you to work with the provider to come up with a payment plan that you can afford.

This can mean extending the length of the finance agreement and reducing the monthly payments, or perhaps even refinancing the remaining balance of the finance agreement and spreading the cost into lower, more manageable monthly payments.

Does the finance provider have to help with a debt management plan?

Current Financial Conduct Authority (FCA) guidelines say that finance providers should do all that they can to ensure that their customers are able to make their repayments and not go into default.

When you apply for finance, you should be given details on what to do if you are struggling with making the repayments. In most cases, you should call your customer advisor or the company’s help centre. They should have someone in place who is dedicated to helping customers in financial difficulty. While they won’t cancel your debt completely, they should be able to help you make an arrangement that allows you to make the repayments without defaulting.

This is why it is so important for you to choose an FCA regulated finance provider. If you go with another company, you may not receive the support and protection that you need if you are struggling to pay back what’s owed on the finance agreement. You may end up in debt or default and facing repossession on the items you financed. This will also be marked on your credit history, jeopardising any future finance applications you decide to make in the future.

Who can you contact for help with your debt? 

There are some free debt advice services available to provide you with guidance on what you can do if you are struggling financially.

Your first point of call should be the Citizens Advice Bureau. As well as having a large help section online, they have offices across the country where you can get face-to-face advice. They will be able to point you in the right direction and find targeted help based on your personal circumstances.

There are also debt management charities that can also help you find a way to manage your finances. There is the UK Citizens Debt Advice and Step Change, that both specialise in helping people in difficulty find a way out of financial distress. They will be able to provide free, impartial advice that should help you feel better about your financial situation.

And remember, if you are a Creditplus customer, you can always contact your customer advisor and ask them for advice on what you can do in your situation.