What to bear in Mind when choosing a Debt Company

With so many debt management companies operating in the UK, the choice can sometimes seem overwhelming. What type of solution you plan to use will probably be the biggest factor in determining which company you eventually choose.

Fee or Free?

If you have decided that a Debt Management Plan (DMP) is the right solution for you, you can choose either a fee-charging provider, or one which does not charge for their services. The latter are debt charities, such as PayPlan or StepChange.

You might choose to use a private, fee-charging service for a number of reasons – because they are privately funded, they may be able to make more time available to deal with your case, for instance.

Nonetheless, paying for a DMP to be administered privately will cost you around £4,000 in fees. By using a not-for-profit provider, you can be sure that every penny you pay goes towards clearing your debts, and nothing else.

All fee-charging debt management companies must clearly advertise the fact that they charge for their services, since advertising rules introduced in 2010.

Before this, some companies were effectively misleading customers about the cost of their services. This history of unethical advertising is another reason it may be wise to choose a free service.

Choosing an IVA Provider

IVAs work differently to DMPs. Since they are a formal, legally-binding solution, they must be administered by a licensed Insolvency Practitioner (IP). This means that IVAs will always incur fees, but these are usually incorporated into monthly payments.

Since these payments are based entirely on what the customer can afford, the fees do not ultimately affect how much IVA users will pay each month.

When choosing an IVA provider, ample research is advised to ensure the company you are dealing with is respected and trustworthy – customer reviews can give a good indication of this.