With the well documented credit crunch fresh in everyone’s mind, spending has somewhat taken a back seat. People are being made redundant, forced to take pay cuts and work less hours. These factors can be particularly worrying should you a lot of debt relying on this income. If you are struggling, a debt management company might be the right solution for you. A debt advice specialist will be able to negotiate with their unsecured lenders and request they consider changing the repayment plan.

For example, they may agree to accept lower payments, based on how much the individual can realistically afford once they’ve accounted for all their essential expenses.

And/or they may agree to reduce (or even freeze) the interest they’re charging on the debt, so the individual knows their payments are reducing the debt itself, rather than just the interest.

This can make a huge difference to the individual’s finances. Since their payments to their unsecured debts are based on their disposable income (what’s left after their essential expenses), they’ll know they can keep on making their payments to their mortgage/rent, so they won’t face the risk of eviction - a major worry for many people who are facing financial problems.

Having said that, reducing the size of their monthly payments will mean they’re repaying that debt more slowly. That means it’ll take longer to repay the debt - and unless their lenders reduce the interest rate by enough, it can cost more, as the debt will have longer to accrue interest.

Plus, a borrower’s credit rating can suffer if they fail to repay the debt as originally agreed - by negotiating lower monthly payments, for example - although there’s a chance this will already have happened, since a debt management plan isn’t an option unless they can’t afford to keep up with payments to their debts, so they may have already breached the repayment terms before their debt management plan even started.