by : Aisha Cristal

Millions of Britons are finding that their debts are becoming a serious problem, as the effects of years of easily available credit has started biting. There are also many companies who promise to solve all debt worries, slash repayments and clear debt completely within a few years. Is this a good option? First, people need to find out exactly what management of debt burden is.

When a person sign up with a company to manage the debt burden, they will take over the servicing of his debts in return for a fee. Instead of having to keep up with multiple repayments to many creditors, the debtor can now make a single payment to the management company who will divide it between the lenders.

This in itself can be a great weight off , as the stress of keeping track of repayments is removed, but a debt management program can offer more advantages than this. The debt manager will contact different creditors and explain that debts of the applicant are unsupportable, and try to agree a new repayment schedule that he can better afford. They will also attempt to get the interest payments on the debt frozen, so that more of applicant's money goes towards clearing the debt rather than just keeping on top of it. In some cases, the debt manager may also be able to get previous interest charges cancelled, reducing the total amount the borrower owes. This reduction depend on flexibility of the lender. If the alternative to agreeing a more affordable repayment is bankruptcy, manger cal also help to avoid such situation.

Of course, it isn't that simple, and the applicant need to bear in mind the drawbacks of debt management before embarking on it. Firstly, entering a program will effectively involve tearing up the credit agreements the applicant has signed with creditors. Even though you'll be agreeing new terms and sticking to them, this will leave a serious black mark on your credit rating. However, this might not of great concern. People with serious debt problems tend to have impaired credit scores already, as payments have usually been missed or debts defaulted on.

The applicant should shop around to see what fees he'll be charged before signing up. To sum up, debt management can offer a solution to acute debt problems, cutting repayments and relieving stress, but it has implications for the applicant's future credit worthiness, and care needs to be taken in choosing a company or organisation to sign up with.