Personal Finance

The Importance of Debt Management and Using Responsible Lenders

The Importance of Debt Management and Using Responsible Lenders

We have put together an article on debt management and the importance of using responsible lenders.

Over 9 million people in the UK are classed as living in ‘serious’ debt according to a study from the Money Advice Service.

If you are in debt and are struggling to meet your repayments, experts recommend that you should speak to your creditors as soon as possible, and you should also consider getting advice from a specialist organisation.

In the UK there are a range of different organisations that can provide advice on debt problems, including free debt advice charities, free debt management providers, and commercial debt management companies.

Couple on a bench - Hervé BRY

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Speaking to a free debt management provider or debt charity is a great idea in principle and a good route to go down.

Though some people find that debt management companies provide a faster service, as unfortunately organisations such as the CAB aren’t always particularly speedy at providing debt advice, and it can take a long time to get accepted onto a number of free debt management plans.

What Is Debt Management?

Debt management can actually refer to a few different things. There are a range of debt management solutions, including debt management plans, IVAs (available in the UK and Wales), Trust Deeds (in Scotland only), Debt Relief Orders, and debt consolidation loans.

Debt management plans are a financial solution that you undertake with a debt organisation or company, whereby the debt management provider puts together a payment plan spreading out your debt into affordable monthly repayments.

What does a debt management provider do?

A debt management provider will speak to your unsecured creditors (ie credit card debts, over-drafts, unsecured loans, etc) to try and negotiate your debt repayments to an amount that is as low as possible.

With a debt management plan you will no longer receive letters from your creditors, as they will be sent direct to your debt management provider – so you won’t have to worry about nasty letters from creditors anymore.

Man walks through park - Photo by VirtualWolf @ Flickr

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Why Is Debt Management Important?

With a debt management plan you pay just one affordable repayment every month, instead of having to deal with multiple debts from different creditors – an amount of money that may have been beyond what you are able to afford.

If you are struggling to meet your repayments or having to borrow extra money every month, a debt management plan can reduce the amount you pay overall each month.

Debt management providers will try to freeze the interest you pay on your loans, and some providers will try to negotiate your debts to as low an amount as possible.

Finding a Responsible Debt Management Company

If you are looking for a responsible debt management company, consider visiting one of the debt management trade organisations such as DEMSA or the DRF (Debt Resolution Forum).

Members of DEMSA and the DRF have to sign up to a code of conduct and are generally speaking the larger and more reliable debt management companies.

Responsible Lenders

If you are in a position where borrowing is sensible, finding a responsible lender can be important.

There are a lot of different websites offering loans, some are even from lead generation websites that will sell your data on to other companies.

If you borrow from a responsible lender, you are less likely to have problems later on down the line – something that we will break down below.

What Should A Responsible Lender Do?

This is from information we found on the SatsumaLoans website that we thought was useful.

1 – Check that your repayments will be manageable. It is important not to borrow beyond what you can afford, and a responsible lender should check this before lending to you.

2 – Only collect payments on a prearranged date. If you know the date your loan is going to come out on, it can help you to make arrangements and plan for that date.

3 – Don’t charge you late or missed payment fees. When borrowing money it is important to meet your repayment dates, but sometimes problems can occur and a responsible lender understands this.

How To Find A Responsible Lender

Of course make sure you do your research. Reviews from 3rd party websites such as Trusted Reviews, Feefo or Review Centre can be useful – find out what people are saying and try to make an informed decision.

This article should not be considered as financial advice. Always make sure that you never borrow more than you can afford to repay, and speak to a professional before making any decisions.

We hope you have found this article useful. Leave any comments or questions below and we will try and get a professional to answer them.

Main image adapted from a photo of Snowdonia in North Wales by Jenny Mackness @ Flickr.

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