It is important to understand the difference between debts management companies and debt consolidation companies, so that you are in the best position to deal with your debts.

Debts Management Companies:

A Debts Management Plan is an informal agreement between you and your unsecured creditors which does not involve any further lending.

Debts Management companies will negotiate with your unsecured creditors so they accept your Debts Management Plan, thus allowing you to make reduced monthly payments. Some creditors can also waive charges and freeze interest, but this cannot be guaranteed.

With the Debts Management Plan, you will make one monthly payment to the debts management company and they will distribute these funds accordingly.

Debt Consolidation Companies:

Debt Consolidation is different to a Debts Management Plan. Although both can offer you a reduced monthly payment to your debt, debt consolidation means that you will take out a new loan which will effectively pay off your existing debts.

You should be able to make a single reduced payment to the debt consolidation loan. Also many debt consolidation loans are secured which means you should be able to benefit from a lower interest rate in comparison to unsecured debts. However, if the debt consolidation loan is secured against your home, you should make sure that the loan is affordable as missed payment could lead to repossession.

Debts Management or Debt Consolidation Companies?

Now you know the basics about the two debt solutions, you may still be wondering whether it is a debts management or debt consolidation company that you should turn to.

It is important to remember that a debt consolidation loan is not for everyone. As they are often secured against a property, you will be excluded if you are a tenant. Also, as it is secured, if you fail to make repayments then your home could be repossessed by the lender.

If your payments are unaffordable and you do not wish to take out a further loan, then a debts management plan could be the right debt solution for you. Making lower monthly payments to your unsecured debts should mean that any secured repayments are more affordable to you.

Debts Management or Debt Consolidation Loans are not the only debt solutions available. And those with high levels of unsecured debts may want to consider an IVA which allows a percentage of unaffordable debt to be written off on completion of the agreement.

The best way to find out if whether a debts management or debt consolidation company could help you is to seek professional debts advice. DebtsManagement.co.uk have a team of specialist debts advisors who could help you either with a debt management plan or a debt consolidation loan.