How does a debt management plan work?

A debt management plan (DMP) is usually set up and managed by a third party provider, for example a debt management company.

Before setting up your plan, your DMP provider will help you put together a budget that shows how much you can afford to pay to your debts after all your priority payments and living expenses have been covered.

Any money left over after your essential costs are covered, you’ll share this out fairly between your creditors. Usually, you’ll make a monthly payment to your DMP provider and they’ll pass on the correct payments to your creditors.

Is a DMP right for me?

We can work out the best way to deal with your debt problem. If a debt management plan is the best option for your circumstances, we can arrange it for you.

Paying off your debts should be the ultimate goal, but there’s no point in putting together a payment plan that will leave you feeling stretched or short of money. We’ll budget your finances carefully and make sure you can afford the payments to keep up to date with your household bills and your debt management plan.

What are the benefits of a DMP?

If a DMP is suited to your situation, there are some benefits:

• If your DMP is free, all of the money you pay into will go towards paying off your debts
• There’s only one monthly payment and this should be set at an amount which is realistically affordable for you
• You’re not tied into the agreement, so you can leave the DMP agreement if you want to
• DMPs are flexible, so they can be adapted to suit your situation if your income or living costs change

Risks with a DMP

It’s important to remember that with a DMP:

• It’ll take longer to repay your debts as you’ll be making reduced payments
• Interest or charges may not stop on a DMP and could be added to your debt, making the total you repay higher
• Making reduced payments on a DMP will affect your credit rating, even if your creditors are happy to accept the DMP
• Your creditors could still take further action, for example passing your debt to a collection agency or starting court action

Apply online now and see if we can help you.