If you have up to £10,000 of unsecured debt, a DMP could help by providing an agreement with your creditors to make a set monthly payment based on how much you can afford to pay.
Want to know how a Debt Management Plan can help you?
If you’re experiencing financial difficulties and finding it harder and harder to make your monthly repayments on such things as loans, credit cards, store cards and other unsecured debts, then a Debt Management Plan or, DMP for short, could help you regain control of your finances.
Normally, the amount you pay back each month is lower than what you are currently paying and Debt Management Plans are generally more suitable for people with debts of less than £10,000.
By making just one affordable payment each month, your debt management provider will in turn distribute this to each of your creditors and will continue to negotiate to reduce or freeze interest and charges.
This allows you to properly budget and plan your money each month giving you greater clarity and will help reduce the worry that so often comes with debt problems.
Key facts about a Debt Management Plan
- A Debt Management Plan can be set up in a matter of days.
- A Debt Management Plan is generally suitable if you have debts of £10,000 or less.
- You will only make a single monthly payment and this will be agreed with your creditors.
- Interest from creditors may sometimes be frozen.
- Many debt management plan (DMP) providers charge a fee for their services but some don't. It's important to remember that if you don't want to pay a fee, you don't have to. You just need to choose a free provider.
- Creditors can still contact you.
- Your credit rating will be affected.
Do you qualify for a Debt Management Plan?
To qualify for a Debt Management Plan there is some criteria that you need to meet.
- Typically, if you have unsecured debts of £10,000 or less you could qualify for a Plan.
- You need to be a resident of the United Kingdom
- You will need to have enough disposable income to be able to make a single monthly payment.
Is a Debt Management Plan right for me?
When you are struggling with debts, it’s often difficult to know what to do, what solutions are available and who to turn to for help. Making the decision to seek help is often the most difficult but also the most important step in taking back control of your finances.
If you are struggling with unsecured debts (loans, credit cards, store cards, overdrafts & catalogue debts) of up to £10,000, finding it more and more difficult to keep up with the monthly payments then a Debt Management Plan may be right for you.
One of the key benefits of a Debt Management Plan is having all monthly payments consolidated into one single monthly repayment. It may also be possible to freeze interest and any other additional charges in some cases.
However, when considering a Debt Management Plan you need to take the time to understand the disadvantages as well as the advantages.
Advantages and disadvantages of a Debt Management Plan
There are a number of benefits in using a Debt Management Plan if you are struggling with mounting debts. However, it is important to remember that there are some drawbacks aswell.
Some of the advantages include:
- You’ll only pay what you can afford each month
- In some cases interest will be frozen
- You needn’t tell your friends and family if you don’t want to
Some of the drawbacks include:
- It ‘s not a legally binding agreement
- Your debt can still get worse if not managed properly
- It can take a long time to complete a debt management plan
- It will affect your credit rating
- If interest isn’t frozen, it can continue to build up
How do I apply for a Debt Management Plan?
Get more information about debt management plans and other debt solutions by contacting the Money Advice Service