Despite the advantages of a debt management plan one of the major drawbacks is that the agreement is not legally binding. As a result creditors are not under any obligation to freeze their interest charges. One of the most common reasons for the plan to fail is that additional interest continues to be added. We explain what you can do to improve your chances of interest being frozen if you use this type of debt solution.

Make sure your Living Expenses Budget is reasonable.

There are a number of things you can do to improve your chances of interest being frozen when you start a Debt Management Plan. One of the most important is to make sure your living expenses budget is reasonable and you are offering to pay as much as you can.

Your creditors will review your budget to make sure your expenditures fit within their agreed guidelines. If you are spending more than they feel is reasonable given your circumstances they are unlikely to meet you half way and freeze their interest.

Maintain your payments regularly as agreed

It is vital that once you have made your proposal to your creditors you maintain your payments regularly and on time. If they can see that you are making your payments regularly this shows that you are serious about repaying your debt.

If they do not have to spend more time and money trying to collect their debt from you, they are more likely to help you by reducing or stopping the charges they are adding.

BMD Tip: You need to give your creditors time stop charging interest. Generally you will need to make payments for two to three months to build up a track record of payment. Once your creditors can see that payments are being regularly received they are far more likely to help you.

What can you do if creditors refuse to freeze interest?

You may feel that you are doing all you can to meet the expectations of your creditors but they are continuing to add interest to your accounts. If this is the case to only thing to do is consider a different debt solution.

A good alternative may be an Individual Voluntary Arrangement (IVA). Once in place, an IVA is legally binding on both you and your creditors and interest and charges must be frozen.

Of course there are many other things to consider before deciding to use this type of debt solution so you must get advice form an experienced debt advisor if you are considering this option.