Being in debt can cause issues with your mental health. It’s very stressful when you have financial problems. You begin to struggle to sleep, you might argue more with your partner or develop unhealthy coping mechanisms such as turning to alcohol. But rather than hide your head in the sand its worthwhile creating a debt management plan. You can learn more about the topic here.

But the main benefit of putting a plan in place will make things seem more manageable. You can either go through a debt management company or contact the lenders yourself. But if you decide to do it yourself you miss out on the helpful support of a third party.

The payment demands will slowly stop as you come to an agreement regarding what you can afford to pay them each month. This takes away some of the pressure from you. Although you do need to be aware that a lender might decide not to accept your proposal ad prepare yourself for that possibility.

Below are a few other things to consider when starting a debt management plan.

Priority Debts

Certain debts cannot go in a debt management plan. These include rent, mortgage, council tax and court fines which are known as priority debts. So, you wouldn’t be able to set up a plan for those. However, by getting affordable payments in place for credit and store cards, overdrafts and loans hopefully you will free up more money. Then you can keep on top of your priority debts.

Freeze Interest

The rules of the Financial Conduct Authority (FCA) say that firms have to consider suspending interest charges if a customer is in financial difficulty. If you are having issues with a company refusing to freeze interest, make sure you send a letter of complaint.

Think About Your Budget

You need to have worked out your budget so you know you can realistically afford the lump sum into your debt management plan that will be divvied out to all your lenders. If your circumstances change contact them straight away. You might be able to reduce the payments you make or take a payment holiday.

Whether To Pay

Some charities like CAP and StepChange will help you set up a debt management plan for free. However you will find that some companies do charge. You need to consider that whatever fees you pay will impact how much you can deduct off your debts each month.

Credit Score

Starting a debt management plan might have a temporary adverse impact on your credit score. But when your debts are paid off it should quickly improve again so don’t worry. Also make sure when the final payment is made that the lender changes it to debt satisfied or paid in full on your credit report.

Informal Agreement

A debt management plan is an informal agreement so generally preferred to an IVA where you are recorded on the Individual Insolvency Register, something which can be seen publicly.

Check Statements

Even after you have set up your debt management plan its important to continue to check your statements. You need to be doubly sure all payments are being made as agreed.