[John Smith]

A Debt Management Plan is not a loan. All it does is place your debts with a third party who deals with your debts for you.

There are no credit checks to pass in order for you to clear debts.
Consumers attempting to take control of their debts are being warned to beware of unregulated loans that can lock them in for years and leave them at the mercy of sky-high exit charges.

Our advice team they is seeing an increasing number of people whose spending is out of control. On average, people who turn to the service for advice owe $31,000 – not including their mortgage - compared to $29,000 in 2003.

The rising trend means more of us will need to reduce interest and actively manage our debts. The large sums involved also mean that more will find themselves in the dangerous territory of unregulated loans.

As the name suggests, these loans fall outside the normal safeguards we have come to expect when we borrow money. They are typically loans made to individuals, outside any mortgage arrangements, for amounts above $25,000.

Personal loans for amounts below $25,000 are subject to the Consumer Credit Act. This ensures lenders cannot impose excessive fees or conditions on their customers.

These protections are particularly valuable when borrowers want to pay off debts early. In these circumstances the Act says lenders cannot charge a fee of more than one month's interest. Where the term of the loan is one year or less, no early repayment charge can be made.

Mortgages, although usually for more than $25,000, have their own protection provided by the Financial Services Authority. Its rules mean that when borrowers repay a mortgage early or fall into arrears, charges are limited to the costs the lender incurs.

You can Clear Debts.