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.
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.
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.
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.
Everything was explained to me fully and any questions asked were always answered. They have made my debt problems so much easier to handle. Thank you so much.Testimonial Melanie
Cannot recommend enough. They have made a very stressful situation so much easier with their professionalism, ease of contact, and customer support. Thank You.Testimonial David
Absolutely brilliant. Could not fault them. Everything was clear, concise and they talked me through every step of the process, making a difficult and worrying situation much easier.Testimonial Lora