Debt Management Plans: be warned of fraud!

Debt Management Plans (DMPs) are under attack. There are a number of companies that are withholding their client’s money and they are keeping the money paid to them instead of paying off their client’s debts.

This does not mean that a Debt Management Plan won’t help you solve your financial problems. It simply means that a very level headed and careful approach is necessary when sourcing a DMP solution. You need to know who the right people are to speak to in order to help you draw up a plan.

A debt Management Plan is one of the solutions to getting out of serious debt. How it works is that you consolidate all your debts. Your creditors are consulted and if they agree a plan is put in place for you to pay one amount of money each month.  The one amount paid then gets distributed between your creditors. The ‘wonders’ of it are that you pay one affordable installment each month and you still have enough to live on.

It is possible for you to set up a Debt Management Plan yourself because there are many resources that give you instructions on how to go about it, the internet for example. Basically you need to create a budget. Then you talk to the people you owe money to. The aim is to get them to lower the rate that you are paying every month. This is usually where you trip up. Facing the people who have been badgering you for money and then trying to negotiate with them can be difficult. This process can be overwhelming and nerve-wracking.

A better solution would be to find a third party to act for you. This arrangement allows you to relax, knowing that there is someone setting up your Debt Management Plan, negotiating with your creditors and coming to a viable solution. This is where the warning come is: make sure you select a reliable charity or company to act on your behalf!

There are many Debt Management Companies to choose from and of course you will be paying a fee for their services. It could be well worth it as these professionals arrange thousands of plans each year and have much more experience than you could possibly have. They will probably put a much better plan together for you than you could.

These companies can also be scams. There have been cases their client’s money not ending up in the hands of the creditors. The Chief Executive of the Money Advice charity was quoted when asked about these companies, that they were, “not in a fit shape to be trusted”. There are however many charities that will give you sound advice, the Consumer Credit Counseling Service, for example. The best advice is check all of your options before you decide.

Remember that if you are temporarily strapped for cash you have the possibility to apply for a payday loan. Make sure you choose a reputable payday loans company because, as with debt management plans, there are also unscrupulous characters operating under the guise of reputable lenders. Make sure that the company you borrow money from is a transparent and registered payday loans company. If you manage your payday loans correctly you can even build up a good credit rating. Contact us for more information on how you can build up a better credit rating with payday loans which are short term or emergency loans to be paid back on your next payday.