Debt Management Plans
DEBT MANAGEMENT PLAN
A Debt Management Plan, or DMP, is an informal agreement between you and your unsecured creditors to pay back non-priority debts, reducing your monthly debt payments to a single affordable amount each month.
DMP – ADVANTAGES
- A Debt Management Plan, or DMP, is an informal agreement to pay one affordable regular payment which - if you have a fee-free DMP - is shared amongst your creditors, or if you have a fee-bearing DMP, is shared amongst your creditors AFTER your management fee has been taken.
- Interest and charges on included debts may be frozen.
- It can slow down creditor contact.
- Debt Management Plans are flexible, informal solutions and are not legally binding, so you can leave the plan at any time, for example if your financial situation improves.
- Your Debt Management Plan provider will deal with your creditors on your behalf.
DMP – DISADVANTAGES
- There are fee-free DMPs available, however if you choose a fee-charging DMP company, you will usually be charged for their services monthly within your usual DMP payment. Fees vary between DMP companies.
- Interest and charges are not guaranteed to be frozen.
- Creditors can still contact you about payments and may refuse to co-operate.
- A DMP may adversely affect your credit rating and your ability to obtain credit may be limited.
- Your debts will still have to be paid in full. Reducing monthly payments to a level you can afford will generally increase the term of your debts.