Pay Plan Debt Relief - How To Gain Financial Freedom Using A Pay Plan For Debt

Using a pay plan to deal with debt is one of the most frequently used systems for dealing with significant debt problems.  If you are struggling to cope with mounting debts and think that a pay plan may be the answer, it is important to understand about the different types of plans available and how to go about finding a good company to advise and help you.

The first thing to understand is that every pay plan for debt is not the same.  There are basically two different kinds of debt relief help that companies can provide for you.  One option is a debt management plan and the other is debt settlement.  They both result in you making one payment per month, but they involve very different approaches, and the right one for you will depend on your circumstances.

Debt management is sometimes referred to as debt consolidation because it involves consolidating all your debts into a single payment.  A debt management plan should not be confused with the kind of debt consolidation that means taking out a new loan to pay off old debts.  There are no new loans in debt management.  These are agreements set up by a debt advisor, and the process involves the advisor negotiating with your creditors to reach agreement about changing the way each debt is repaid.

What normally happens is that new repayment terms are set up which result in you having to pay out less each month.  This is normally achieved through reduction of interest charges and other fees.  The overall effect is that your creditors have to go through the debt management company, and you just have one monthly payment to find, which you make direct to the company.  They then pass this on and you are free get on with your life, without being constantly approached by people asking for money.

To be accepted into a debt management plan, you will need to have a steady income and enough income spare after covering your living expenses to use for the monthly payment.  If your situation is more serious and you think you will not be able to afford such payments, you will need to look at the other type of pay plan for debt, which is debt settlement.

Debt settlement is different to debt management because it involves actually reducing the core amount of your debt.  By getting agreement from your creditors to write off a proportion of your debt it becomes possible to make the balance of the debt affordable for you to repay.  This is a very specialised field and involves skilled negotiators dealing with all your creditors to get the best possible deals for settling your debts for reduced amounts.  The best companies can get between 40% and 60% of your debts wiped out.

If you are a UK resident, there is a scheme called an IVA (individual voluntary arrangement) which is used instead of debt settlement.  It is a legally binding arrangement, only available in the UK, which achieves the same result of a fixed monthly payment and writing off much of your debt.

When you start on a debt settlement plan, you no longer give any more money to your creditors, and instead begin to make regular monthly payments into a new account.  This money is saved up and used to pay off creditors when settlement deals are reached.  The length of time it can take to reach agreements can vary enormously, depending on the creditor and many other factors.  Some may be settled in weeks, others could take a couple of years.

If you decide you want to find out more about pay plan debt relief, the first thing you will need to do is find an appropriate company to help you.  This is very important as there are many companies offering their services, but some of them take substantial fees from people without resolving their debt problems.  Provided you choose a reputable company there is no problem, but it is essential to take steps to make the right choice.

The best way to protect yourself is to make sure you only approach the most reputable and established organisations.  Companies that have been around for years will be able to demonstrate a history of having helped many other people.  The safest approach is to follow recommendations for reputable organisations and then apply to a few of them.  This will allow you to compare what is offered to you and select a company that you feel happiest with.