Debt Management Plan – 5 Things You Must Know Before Getting One

Are you one of those many people struggling with debt and looking for a permanent solution to deal with it? Seeking to build financial capability for better outcomes? A debt management plan (DMP) is one of the most sustainable debt solutions that may be right for you. However, you should know how it works and what you need to know before getting one.

·        DMP is an informal agreement between a debtor and his creditor(s) for paying back non-priority debts. These are less urgent debts on things like store cards, bank loans, student loans, and credit cards, etc.

·        As a debtor, you must deal with your priority debts, including rent, mortgage, gas, and electricity arrears, income and council tax, and magistrates' court fines, etc., before you set up a DMP.

·        You can easily repay your debt by one affordable monthly payment divided between the creditors you owe money to.   

·        Unlike Individual Voluntary Arrangement, DMP is not a legally binding agreement. It means you can cancel it any time since you are not formally tied for a minimum period.

·        In an IVA you need an insolvency practitioner to deal with your creditors for you, while most DMPs are managed by licensed DMP providers.

As you don’t need to deal with your creditors anymore, which sounds great, you should at least know whether or not entering into a DMP is a good option for you.

DMP is right for you if;

·        You are struggling to keep up with your loans, store cards and credit cards.   
·        You can afford to pay set monthly amounts on your living costs and priority debts.
·        You would like a debt expert to deal with your creditors on your behalf.
·        Making one affordable monthly payment that will help you to budget.

If you are eligible for the above-mentioned things, moving ahead, you need to make ensure your actually understands the real impact of entering into a DMP. You can take expert debt help UK to improvise your decision-making process.

Here’s what you should know before getting a debt management plan.

1.      It may take longer to clear the debt than other debt solutions because you will be paying less every month.

2.      Your creditors can reject the proposed plan or may not agree to freeze interest and charges on your debts.

3.      If interest and charges are in place, the amount you owe may not go down as expected after entering a DMP.  

4.      If you are having a debt in joint names, the creditor or their hired debt collection agency may keep on chasing your partner for all of the debt unless you get a joint DMP.  

5.      You can set up a joint DMP for you and your partner regardless of different levels of debts or incomes, and even if debts are in one name.  

6.      You can get free debt advice UK, but your DMP advisor may charge you a fee.

7.      Your creditors you owe money to may refuse to cooperate further or don’t want to enter into the agreement with you. 

8.      Your availed DMP will be shown on your credit file for about 6 years, starting from the date you paid off or get defaulted.

If you are still in doubt if it’s a right debt solution for you, get face to face free debt advice with an experienced, local debt advisor as ours at IVA Experts UK.