Generally debt management plans are drawn up with the help of debt management experts during a single or a series of face to face meetings. During these meetings the financial circumstances of the client will initially be analysed in detail to determine if indeed a debt management plan is the best option.

Once this has been decided, the person organising the plan, the debt manager,  will contact the client’s creditors and attempt to negotiate a cessation of late payment penalties being charged to the accounts, to negotiate reduced or frozen interest payments, and to negotiate an extended repayment period.

The debt manager will take one monthly payment from the client and distribute it to the client’s creditors until the debts are repaid. The single payment will include an element for the debt manager’s fees.

Some of the major benefits of a debt management plan are:

* Monthly repayments are fixed so there are no uncertainties regarding future payments
* In many cases interest rates are frozen and additional charges are stopped
* It is far simpler to make a single repayment that to pay a collection of individual creditors
* Some of the creditors may be able to stop late fees and lower interest rates.

Some of the downsides of a debt management plan are:

* It is necessary to close all credit card accounts
* They are only appropriate for people who have a regular income and can keep to the repayment schedule
* Once a repayment amount has been agreed, only rarely it is renegotiable
* Credit rating are adversely affected by debt management plans
* A debt management plan is only appropriate for unsecured loans

Are the Small Monthly Payments Going to Entice Further Debt?
There are times when the consumer becomes enticed with the lower monthly payments and the zero balance on the credit cards for the consumer to rack up debt again. This means that in addition to the payment that is made for the debt consolidation loan, another payment will be required for the debt that has been accumulated after the loan. Are you willing to make the commitment to avoid debt until the consolidation loans have been repaid, if not for the rest of your life? If not, than a debt consolidation loan may not be for you!

What Fees are Associated with the Loan?
Some debt consolidation companies have fees which are associated with the application of the loan, as well as interest rates. Be careful for these fees when you are searching for a debt consolidation loan.

How long is the Term of the Loan?
It is important for the consumer to realize that debt consolidation loans are often stretched over longer periods of time. Some credit card debt consolidation loans have increased up to ten years – take into account the term in which you can repay the debt alone, without the consolidation loan before accepting the consolidation loan.