Debt Management - explained...
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What is a Debt Management Plan?
A DMP or Debt Management Plan is an informal agreement with your creditors.
If you are in financial difficulty and struggling to maintain your monthly payments, a debt management plan allows you to reduce the amount you pay to the creditors each month so that the payments are within your affordable monthly budget.
A Debt Management Plan is a solution to actually start repaying your credit commitments instead of juggling those credit cards.
It maybe a long term plan as you repay the entire debt although you may be able to stop the interest and charges.
Is it right for me?
Debt Management Plans are suitable for debts of any size, provided the monthly payment you offer your creditors as part of your plan is reasonable.
If you want a temporary solution or you cannot afford to do an IVA and are keen to avoid bankruptcy then this is the next available scheme.
Advantages
- One monthly affordable payment
- Start to repay your creditors without further borrowing.
- Stop creditor harassment
Disadvantages
- The plan may last many years
- Default notices will be recorded on your credit file. This will mean that you will find it difficult to get credit in the future.
- Creditors are not under any legal obligation to suspend interest or late payment charges.
- Secured debts (i.e. mortgages and car HP) and other debts can not be included in an Informal Debt Management Plan.