How to choose a debt management company
Choosing the right debt management company is an important process and will require some due diligence along the way.
When handing your personal details over to anyone it is important that you know who you are dealing with and that they will help you in the right way.
A debt management company will usually have a number of things that they will need to trade legally these include:
- A Consumer Credit Licence
- Compliance of the OFT’s debt management guidance
If a debt management company has both of the above then you should be well on the way to knowing that they are the right type of company to use.
There are 2 different types of debt management companies. Firstly the charitable services companies that will offer free debt advice and secondly the types of companies that will charge a fee.
Unfortunately many of the free debt advice services are facing huge backlogs as debt problems mount in fact some people are waiting anything up to 3 weeks just to get an appointment to discuss their debts.
In contrast fee charging debt management companies will often deal with your problem a lot quicker and the main advantage is that they will also administer your payments to creditors for you. They will also on occasion be able to negotiate better terms with your creditors which could mean substantial savings.
There are many factors to take into account when choosing a debt management company including:
- How quickly can you repay your debt?
- How much will you be charged?
- What do you get for your money?
- Is the company regulated?
The OFT consumer credit register will be a good starting point as it is a register of companies that conform to the OFT guidelines.
The key when choosing a debt management company is to think about the service available rather than simply which company is the cheapest. You should shop around to find one that is most able to address your needs. Lastly make sure that you take into account that using a debt management plan can also mean an effect on your credit scoring as it will be referenced on your credit profile.
Debt management plans are a good option if your financial problems are temporary and the situation is likely to improve in the near future. They can be more difficult if your ability to repay your debts will not improve within 12 months. Remember too that there is no guarantee your creditors will accept the reduced payments in which case you may still face court action.
