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Debt Management Plans - DMPs

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Debt Management Plan - DMP

Debt Management Plans, often known as DMPs are informal agreements that are designed to help people to regain control of their finances. 

DMPs are designed as a compromise between the person struggling with debt and the companies who have lent the money to them. 

There are many benefits to Debt Management but this solution is not for everyone and needs careful consideration. If you are already on a Debt Management Plan then you can still swap to another and potentially better debt solution. It is always worth exploring all of your options.

  • Reduced Debt RepaymentsFits into your household budget
  • Consolidate PaymentsMake just one monthly repayment
  • Freeze interest and chargesSo your debt stops getting any bigger

How does a Debt Management Plan work?

A tailored debt solution that is designed to make your debt repayments easier and simpler. DMPs are informal agreements which means your DMP can change with your circumstances.
Reduce your repayment to debt
DMP payments are calculated to fit into your household budget. Everyones DMP is tailored to them so it is always affordable.
Support With Your Creditors
Your DMP provider will do all of the complicated stuff and negotiate with your creditors for you to get your plan setup.
Freeze interest and charges
Negotiations happen with your creditors to freeze the interest and charges of the debts included in your plan so that you can actually become debt free.
consolidate your debt repayments
Consolidate all of your debt repayments into one. A DMP is the only payment you make to your unsecured debt every month.
Flexible to your needs
Everyones situation changes over time. DMPs are designed to change with you. Your payments can be moved up and down as your budget changes.
Regular reviews
Your Debt Management provider will review your plan regularly and offer advice to make sure your debts are handled professionally.

Example of a Debt Management Plan:

Everyones debt total, monthly repayments, interest rates and situation are unique, so this is purely an example of how a Debt Management Plan could work.

Before a DMP:

Total Debt to Repay Including Interest: £13,300
100%
Monthly Repayments: £350
100%
Monthly Payments: 6
100%
Interest Rate Charged: 26%
100%

After a DMP:

Total Debt to Repay Including Interest: £9000
67%
Monthly Repayments: £250
71%
Monthly Payments: 1
16%
Interest Rate Charged: 0%
1%

The disadvantages to DMP

As with all debt solutions, Debt Management needs careful consideration and there are disadvantages. DMP's are just one of the options available to people struggling with debt.
Negative impact on Credit rating
Debt Management will have a negative impact on your credit rating. For most people struggling with debt though, their credit rating may already be poor.
No debt is written off
Unlike other debt solutions, with Debt Management your debt is repaid in full and none of the debt is written off.
Interest isn't always stopped
Debt Management is an informal agreement. As a result there is no guarantee that interest and charges will be stopped by every creditor on the DMP
Not all creditors agree
Creditors don't have to agree to the terms of a DMP. This means they can still chase you for payment, add CCJ's and charge interest.
In debt for a long time
DMP's are not recommended if they last longer than 10 years. Reducing your repayments can increase the time spent dealing with debt.
Must keep up wth repayments
If you miss regular repayments to your Debt Management Plan then it may fail and you could find yourself back to square one.
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