Debt Management Plan

What is a Debt Management Plan (DMP)?

A Debt Management Plan (DMP) is an informal agreement between you and your creditors. A debt management company will take a close look at your financial situation and communicate with your creditors to agree on one affordable monthly payment. This one payment is divided among your creditors and will cover all your debt.

If you are interested in setting up a Debt Management Plan, or just want to know more, get in touch with us for free professional debt support.

A Debt Management Plan (DMP) would usually be used when either:

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How can I get a Debt Management Plan (DMP)? There are two ways:

If you go for the second option, you will make regular payments to the provider, and they will share these payments out between your creditors once any monthly fees owed to that company are deducted. If your financial situation changes, so can your plan, resulting in reduced payments that suit you.

What debts does a Debt Management Plan (DMP) cover?

Debts are separated into two categories – priority and non-priority. Priority debts are not covered by DMPs.

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Priority Debts:

The severity of not paying priority debts mean that they cannot be included in a DMP. Not paying them incurs legal action that can result in you losing your home. It is essential that these debts are cleared before you set up a DMP.

Non-priority Debts:

Non-priority debts have less severe consequences so the repayments can be condensed into reduced payments using a DMP.

How do I know a DMP is right for me?

It’s important to remember that Debt Management Plans might not be right for everybody, and Money Helper is able to give you free advice about both your eligibility and your suitability: Click here for The Money Helper website

Debt solution providers have a team of professionals ready to help you every step of the way. Simply contact us and we will discuss your financial situation to help you make the right decision.

What do I need to set up a DMP?

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To get a Debt Management Plan, you need to set up a plan with a debt management plan provider that is authorised by the Financial Conduct Authority (FCA)Click here to check your company’s status.

If you are self-employed, you can still apply for a DMP.

The provider will also need to know about:

It’s important to note that, unless stated, creditors can still ask you to pay your full debt at a later stage, and that they may take action to recover their money even if you keep up with your repayments. As a DMP is an informal agreement it will not offer the same level of protection as the formal options.

How much does a DMP cost?

The costs involved in Debt Management Plans include setup fees and handling fees, which may be charged each time a payment is made. It is therefore crucial that a person gets to know the charges each individual company applies to arrangements and transactions, as these can differ from one to another.

It should also be noted that plans can be cancelled should a person fail to keep up with their payments.

A DMP involves paying over a long period of time, so you will be charged interest by a DMP provider. However, lenders may agree to freeze interest rates during your DMP.

The Benefits and Disadvantages of Debt Management Plans:

Benefits

Disadvantages

Free debt support

Your credit rating and credit file will be impacted for six years or longer depending on your plan

A clear, established budget

Mortgages and secured debts are not covered

One affordable payment

Your debt must be paid back in full

You can request interest and charges to be frozen (at creditors’ discretion)

You may incur fees on top of your repayments

In many cases, creditors will cease contact

No protection for assets

No need to release home equity

 

Quick to implement

 

*However, using a DMP can also improve your credit report & credit file in the long run. 

The biggest advantage of a Debt Management Plan (DMP) is the peace of mind it offers. Using a debt solution provider will help you organise your debt into manageable and affordable payments, and you will receive free professional support every step of the way.

Contact us today | Get on track to a debt-free life

No one should have to deal with financial troubles alone. Whether you’re looking to resolve your financial struggle once and for all or just want to ease the burden by talking things through, we can offer you information and assistance on how best to proceed. Get in touch today to take the first step towards a better financial future. See if you qualify.