what are debt management companies?

Funky01

Hi,

Just curious really. I have debt, but I'm managing to pay it fine - (just!) - although it will take a good few years to clear! :eek:

I have noticed a few people mention Debt Management Co's and I wondered if someone could enlighten me further. if it's not a loan and yet reduces your debt into one "manageable monthly figure", then how? What is it? A present?? !!

Also, how does it affect your credit rating? What does the debt management company gain from it? If you have a partner, does it affect them aswell if you are on a debt management scheme?

Thanks.

Northernbird_2

A debt management company basically acts on your behalf. The best ones are CCCS and Payplan as these are free and don't charge you. They look at your income and expenditure, and determine what your surplus income is each month (after food, bills etc have all been paid for). This is the amount than can be paid to creditors. This amount is pro-rated between them according to the amount of money owed, and a debt management company would then write to all of your creditors, and offer the payment amount, and likely ask that interest and charges are frozen.

It does affect your credit rating, as you are effectively defaulting on the agreement to pay £x amount to your creditors and offering a lower sum. It's not always the best option for people with debts, as it depends on income, etc.

It would only affect your partner if you are financially associated with them on your credit file. So if you have joint debts, it would affect your partner.

Hope this answers your queries. If I've got anything wrong guys, jump in!

xx

Mercuryrising

The only thing about the CCCS is that when I phoned them the guy on the phone seemed to do a very hard sell of a DMP and also rattled through the interview in such a rapid speed. They also said they would send out in my pack information about IVAs but when I got them they were mysteriously left out!

Then I read that they they hold the money in the bank for 25 days earning interest before paying off to the creditors. Are you sure they are not on commission? Despite its charity status they seemed VERY businessy in their manner.

I'm not knocking them completely though - I wouldn't trust a non charity DMP as far as i can throw them and they have helped many many people.

But I wouldn't call them the best advice bureau that everyone says they are from my experience.