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Debt Management

What is a Debt Management Plan?

A Debt Management Plan (also known as a DMP) is an informal agreement with your creditors to repay your debts at a lower monthly rate that is more affordable to you. If you are struggling to meet yourdebt repayments, yourself or a debt management company can negotiate your payments, in order to get lower more manageable monthly repayments towards your debt.

A Debt Management Plan can be a great debt solution for a temporary period, or when you can't manage financially every month. Because a Debt Management Plan is informal, you or your creditors can opt out of the agreement at any stage.

Read on to find out more about Debt Management or fill in the form and one of our advisors will contact you to advise on your debts.

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Debt Management Companies

A Debt Management Company is an organisation that negotiates and handles your Debt Management Plan on your behalf. There are so many firms that offer this service and most charge a fee for their service, which will come out of your monthly payment. Be wary of Debt Management Companies that charge additional upfront fees or very expensive management fees as this may not benefit you and you will be paying less money to your debts each month. There are plenty of companies available that do not charge upfront fees or unfair management fees, so do shop around.

The good thing about a company handling your Debt Management Plan is they may have more weight when it comes to dealing with your creditors. In some cases, they may even get your interest frozen (although this is never guaranteed). They are normally very good at following structured guidelines for your income and expenditure and can normally come up with a reasonable monthly payment that will leave you comfortable to get by every month, whilst paying down your debt and keeping your creditors happy that they are receiving monies owed to them. In a Debt Management Plan, you will make one payment to the company and they will disperse it accordingly, instead of you having to handle all the payments yourself.

Self administered Debt Management

You can administer a Debt Management Plan by yourself and there are certain charitable organisations out there, to help you and show you how to go about this. You renegotiate your payment terms with your creditors showing them that you are struggling to meet payments, By doing this you will mostly find that they are sympathetic about it. The fact that you are dealing with the problem shows that you are committed to repaying the debt. If you leave it until your creditors are threatening some sort of action against you, they may be less sympathetic.

It isn't easy to set up and maintain your own Debt Management Plan. You'll need to be a 'tough cookie' in order to negotiate the best deal for you; they may in any case refer you to a Debt Management Company. It isn't likely that you will have any sway in getting interest and charges frozen on your debts either.

Debt Management Questions and Answers

The length of time of a Debt Management Plan depends wholly on how much the debt is, what your monthly payments are and how long your circumstances remain the same. You may want to remain in the plan until the debt is cleared, or you may see it as a more temporary measure, until your income improves and you can opt out and return to normal payments again. You may have less debt to pay off and have a lot of disposable income every month in which case you will pay the debts off quicker, or you may have higher debt and less disposable income which means it will take longer to repay the debts.

If you want to remain in the Debt Management Plan until the debt is paid in full, a rough guide of the duration of the plan can be obtained by dividing your total debt by your new monthly payment amount giving you an approximation of the total number of months it is expected to last.

  • An informal agreement that can be stopped at any time.
  • You may be able to vary your payments if your circumstances change for the good or bad.
  • Interest and charges could be frozen (if creditors agree). A debt management company will negotiate with creditors on your behalf, so offers are more likely to be accepted and interest frozen than if you try to do this yourself.
  • Creditor pressure is eased as they deal with us.
  • 1 easy monthly payment to cover all unsecured debts.
  • A Debt Management Plan is not binding on creditors who do not want to take part, but they cannot refuse any payments made to them.
  • A Debt Managment Company will handle everything on your behalf including setting up the plan, distributing paymetns and dealing with any creditor correspondence.
  • Creditors may be prepared to negotiate or write off the remaining balance of what you owe after a period of time if
    • You have shown to make every effort possible to repay the debt.
    • You have maintained regular payments
    • You can gain access to a lump sum to go towards the debt and settle completely.
  • A Debt Management Plan can remain on credit file for sometime after completion if a default notice has been issued.
  • If your creditors refuse to freeze or reduce interest this can lead to increased debt level as repayments are less than original contractual payments. Any further collection actions may incur costs that will normally be added to the debt.
  • Debts will be repaid over a longer period of time than if contractual payments were made.
  • You will repay debts until they are paid in full, unless you opt out of the plan to go back to your usual debt repayments.
  • Repaying debt over a longer period may increase the total amount to be repaid.
  • Your ability to obtain credit will be affected in the short term and might be affected in the medium to long term.
  • A Debt Management Company cannot guarantee that interest and charges will be frozen, although they may have more success than if you were to try and do this yourself.

A Debt Management Plan deals with all your unsecured debts which are debts like loans, credit cards, store cards and bank overdrafts. If you have secured debts such as a mortgage or HP agreement, these should be prioritised in your income and expenditure. We will always help and advise you with how to deal with your secured and priority debts.

Yes. Anyone can enter into a Debt Management Plan, as long as you have some sort of monthly disposable income, after your living expenses have been taken out.

Your payments and your situation will be reviewed by your assigned finance manager periodically. If your income and expenditure fluctuate and your situation improves, there may be an opportunity to increase your monthly Debt Management payment and this will shorten the life of your Plan. However, if your situation deteriorates, it may be possible to temporarily reduce your payments until they improve.

The cost of a Debt Management Plan varies. It is free if you arrange it yourself or if you go through on of the charitable debt management companies. There are also debt management companies that take a fee every month from your payment

Entering into a Debt Management Plan should have a negative effect on your credit rating because your creditors will be receiving a reduced payment every month. However, if you are thinking about entering into a Debt Management Plan, then it is likely that your credit rating is already affected. This is because you may have been struggling to keep up to date with repayments and your creditor/s will have registered the missed payment/s on your credit file.

As well as negotating your payments with your creditors, your Debt Management Company should try and get interest and charges frozen, although it is never guaranteed as your creditors are not legally obliged. Most Debt Management Companies should have a good relationship with the creditors which can prove helpful in these circumstances.

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