What is a Debt Management Plan (DMP)? | Do You need it?

What is a Debt Management Plan (DMP)? | Do You need it?

You can manage your debts and pay them off better and at an affordable rate with the help of a debt management plan (DMP). The whole thing works by reducing the monthly payments. DMPs are particularly suitable for non-priority debts like overdrafts, credit cards, and personal loans. The DMP provider who you approach will help you work out a favorable payment plan. You’ll then need to make a monthly payment to them who will pay the creditors on your behalf.

What is a Debt Management Plan?

A Debt management plan is an agreement that you can make with your creditor. With the help of this, you are able to manage your debts and pay them off in an amount that you can afford. Addressing high consumer debt, DMP is an effective way to manage your debts, making a lesser number of monthly payments and saving money in interest.

To be more specific, it is not a plan, rather a program. The amount that you have to pay to your creditors each month, including payments and interests, it reduces as debt management agencies work on it with your creditors on your behalf. The parties settle it down to an amount that is affordable for you. And you can take 3 to 5 years to pay your debt off.

Advantages of a DMP

  • You can get DMPs for free. Though most companies will charge you for it there are some companies from whom you can avail DMPs for completely free.
  • After you put together a budget for your monthly household, to your creditors, you only pay what you can afford.
  • You can add the arrears to your DMP, in case you fall behind with household expenses. It will help you to get back your account up to date. Though you still have to keep making your regular monthly payments that are ongoing.
  • DMP companies will review your DMP on a daily basis so that you can pay the amount affordable.

Disadvantages of a DMP

  • In some cases, it can happen that your creditors continue to contact you.
  • Though maximum creditors will stop charging interest or other charges, or reduce it, you can face some who will not.
  • The amount that you owe currently can increase if the creditors keep adding interest and charges.
  • It is not mandatory that your creditors have to reduce the payments.
  • Further, court action, like County Court judgment (CCJ), can be taken any time by your creditors 

How to Apply For a DMP

  1. In the first place, you have to find out the best DMP for you. You can take some advice from experts regarding this matter.
  2. After finding a standard DMP company, they will provide you with a “personal action plan”. You will also get the information about how to set it up. They will support you during the whole process.
  3. After the company gets all the information and documents they need, they will start to pay your creditors through your DMP after contacting them.

How the Debt Management Plan Works

Generally, you can pay your debt off with an amount that is affordable for you, with the help of a DMP. If your debts are non-priority debts like personal loans, overdrafts, store or credit cards, DMP is the thing that you should go for.

The company to whom you will go for a DMP will work on your financial situation and decide the amount that you can afford. Then they will contact your creditors. Your DMP provider is going to charge you on a monthly basis to pay your creditor for you.

Debts That You Can Pay With a Debt Management Plan

Your non-priority debts are the amounts that you can pay off with a Debt Management Plan, which includes:

  • Personal loans
  • Overdrafts
  • Money borrowed from friends or family
  • Bank or building society loans
  • Catalog, home credit or in-store credit debts
  • Credit card, store card debts or payday loans

Debts That You Cannot Pay With a Debt Management Plan

You cannot pay off your priority debts using the Debt Management Plan, including:

  • TV Licence
  • Court fines
  • Gas and electricity bills
  • Council Tax
  • Income Tax, National Insurance and VAT
  • Child support and maintenance
  • Mortgage, rent and any loans which are secured against your home
  • Hire purchase agreements, if you buy essential things with them.

From Whom You Can Get Debt management Plans?

Of course, you are going to find many debt advice companies that can arrange a completely free Debt Management Plan. They will assure you that the amount you pay them, they are going to use that to pay your creditors.

With the help of this, you can get rid of your debt faster than you expect. Free debt advisers can easily understand your financial situation as every year, they give advice to a lot of people. They are going to support you all the way and are going to provide you with all the information that you need. Because they are highly trained to reduce and manage your debts.

In case you choose a Debt Management Plan provider that is going to charge you, you must make sure that it is authorized by the Financial Conduct Authority (FCA). So that they meet the agreed standards.

Get Debt Advice About Debt Management Plan For Free

Before getting a Debt Management Plan, you should go to an experienced debt adviser and consult. Because your personal circumstances are the things on which the best debt solution for you is depending.

You can make the right decisions with the help of free debt advisors and you can get rid of the debt faster than you expect. Here are the things below that the debt advisors do.

  • Keep all your personal matters confidential.
  • Show you the better way in which you will be able to manage your finance.
  • Never set you up or judge about the situation you are in.
  • Show you the way that you can use to deal with your debts that you probably did not know.
  • Does not matter if your problem is big or small, they are going to listen to you gladly.
  • They are going to check if you have applied for all the benefits and entitlements that you can get.

You can easily manage to clear your debts with the help of the advice of an experienced debt adviser. Only one conversation is enough and you are going to save your time if the adviser is experienced enough. If you still cannot decide where to start, you are not the only one. Almost half of the people in debt have not any idea about the best way in which they can pay their debts off. This is the situation, where you need an experienced debt adviser the most.

What If You Do Not Take Advice?

Over eight out of ten people started to feel less stressed after taking debt advice. They became less anxious and brought stability to their life again. Here are the things below that you can face, if you let your debt build up before you get advice from a debt adviser.

  • Your cards can get maxed out.
  • No one else is going to lend to you.
  • Things can get out of your control.
  • It takes much longer than your expectation to pay back what you owe.

You can get help from a debt adviser in a way that is preferred, over the phone, online or face-to-face.