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Debt Management

About Debt Management plans

Debt management companies offer a service whereby they act as an intermediary between someone who owes money (you the “debtor”) and the multiple people that they owe money to (credit card companies, banks, catalogues etc, “your creditors”). They make contact with the creditors and try to renegotiate the debt on your behalf. After that, you’ll typically pay one fixed monthly payment to them and they will distribute it out between your creditors (after taking their fees).

Cartoon Piggy bank with money stacked next to it

Finance Affiliate works with a number of preferred Debt Management organisations and can get you started in setting up a Debt Management Plan.

How does it work?

After you have been accepted as a new customer, the debt management organisation will collect information about you:

  • Creditors (e.g. lender, type of credit, account number, balance, etc.)
  • Monthly income (e.g. salary, benefits, etc.)
  • Monthly expenditure (e.g. rent, bills, car/transport, household, etc.)

From this information, they will agree an affordable payment which you will pay to the debt management organisation on a monthly basis.

At this point they will make contact with your creditors to explain the situation and try to reach a settlement on your behalf. In doing so, they will try to negotiate the following items:

  • Reduction in the overall level of debt
  • Freeze interest charges
  • Reschedule the debts to be paid off over a longer period of time
  • Try to prevent the creditor progressing any legal activities
  • Get the creditor to communicate directly with them, rather than you, in the future

Although they will endeavour to get the best result possible, there is no guarantee that they will be successful in their negotiations.

Professional fee-taking debt management companies will typically take the first one or two months payment to cover the costs of processing and negotiation on your behalf. After this they will take a small monthly fee from each further monthly payment. The remaining money each month will then be shared out a pro rata basis between your creditors.

Keeping up your payments

Unlike other debt solutions (usually ones that apply to larger sums of debt in excess of £15,000) a Debt Management Plan is not legally binding on your creditors. However, all major financial institutions are obliged to co-operate except in circumstances where you do not keep up your end of the agreement i.e. to pay the agreed monthly sum.

So if you enter into a Debt Management Plan, be sure to agree an affordable monthly repayment and stick to it!

Will my credit rating be affected?

By entering into a debt solution, your credit rating may be affected. Even though you may come to an amicable agreement with your creditors to reduce your payments, reduced or missed payments can be recorded by credit agencies to reflect that you have not kept up with the original repayment schedule.


  • Fair and open way of sharing payments, widely understood by creditors.
  • The debt management company will help you prepare your plan, including agreeing the level of your household and personal spending based on guidelines, which can then be used to put your case to the creditors.
  • The debt management company will negotiate with creditors on your behalf, so offers are more likely to be accepted and interest frozen than if you try to do this yourself.
  • You may be able to vary your payments if your circumstances change.
  • You make single payments each month or quarter to the debt management company, which is responsible for administering all payments to your creditors.
  • Any monthly payment you make should be passed on to creditors within 5 working days.
  • Some debt management companies do not charge you a fee.
  • Creditors may be prepared to write off the balance of what you owe after a
    period of time if:
    • you have shown that you have made every effort to repay them as much as you can;
    • and you have maintained regular payments to the debt management company.


  • By entering into a debt management plan, your credit rating may be affected. Even though you may come to an amicable agreement with your creditors to reduce your payments, reduced or missed payments can be recorded by credit agencies to reflect that you have not kept up with the original repayment schedule.
  • The debt management company can’t force creditors to accept your proposal or freeze interest. A plan is not binding on creditors who refuse to take part in it, but they can’t refuse to accept any payments made to them.
  • You remain liable to pay your debts until they are paid in full.
  • Creditors could still take enforcement action against you, for example by getting a county court judgment and then an order, which creates a charge on your home*, even if you are keeping up your payments under the plan, unless they agree not to do so.
  • You may not be able to make reduced offers if your circumstances worsen and you can no longer afford your agreed monthly payments.
  • A plan can last for several years. However, some creditors may be prepared to freeze interest for only a shorter time. If interest and charges cannot be frozen for the full length of the plan, then the total amount you end up paying under the plan could be more than the original amount of your debts and could extend the lifetime of the plan.

* Having a charge on your home means that if you don’t repay the debt, the creditor has a claim on the proceeds if the property is sold.

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