Many people who are struggling with credit card debt, unsecured loans and high APR personal overdrafts are turning to debt management plans. However, a debt management plan isn't a debt solution that is suitable for all situations. Does an Individual Voluntary Arrangement provide a more viable debt solution for dealing with serious debts?
What is a Debt Management Plan?
A debt management plan is a voluntary agreement between a debtor and his creditors. A minimum of £100 must be contributed each month towards the agreement. Credit card debt and unsecured loans are all grouped together meaning that personal finances are greatly simplified for the borrower.
It minimises the risk of creditor harassment as the appointed private company distributes money to creditors on a pro rata basis. A debt management plan often results in further interest and charges being frozen which can help reduce the overall debt burden. However, most companies offering debt management plans charge about 15% for their services.
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