debt management plan – DMP
A debt management plan (or DMP) is an informal agreement in which you agree to repay your creditors off at an agreed, but affordable, amount each month until your debts are paid off. Once instructed, whoever you chose to manage your debt management plan will talk to your creditors and arrange an affordable repayment on your behalf. You simply make one monthly payment to them and they will distribute the money as agreed.
A debt management plan may be the correct debt solution for you can still afford to repay something after paying for essentials; such as food, transport and utilities. Since you are paying less than you should, your creditors might still chase you for payment, but we have a good success rate in stopping calls and letters from creditors.
Please Note: Debt Assist UK only provide debt advice; we do not directly provide any financial solutions ourselves. We will talk you through your available options and if appropriate, we can offer you a no-obligation referral to a regulated debt solution provider, from whom we may receive a referral fee. Some debt solutions involve fees to you – these fees may differ based on the circumstances of your individual situation, but will always be explained to you by your chosen solution provider in writing before you decide to take up their service(s).
Pro's of a debt management plan
Just one monthly payment.
Only repay what you can realistically afford.
Creditors usually stop chasing for payment.
cons of a debt management plan
You credit rating will almost certainly be affected.
Can take a long time.
Creditors can continue to chase payment.
Debt Management Plan FAQs
what debts can be included in a DMP?
In a debt management plan, you can include unsecured debts, so most everyday debts are likely to be included; credit card, payday loans, overdraft, catalogues and personal loans can all be included. However, secured loans and certain other debts, will need to be paid separately.
can my creditors still contact me?
Unfortunately as this is an informal debt solution your creditors can still chase you for payment. However, whoever manages your debt management plan will try their best to ensure that this doesn’t happen.
Will a DMP affect my credit rating
In short, yes. However, if you are in a position for a debt managment plan to be a viable option, you are already struggling to meet repayments on multiple debts, and therefore your credit rating is already likely to be affected. however, a DMP is the first step on rebuilding your credit score.
Alternatives to a debt management plan
Individual Voluntary Arrangement - IVA
An individual voluntary arrangement (IVA) is a legal procedure for people in financial difficulties with unsecured debts. It is a legal agreement between you and your creditors to only pay what you can actually afford to pay off your debts.
protected trust deed
Only for residents in Scotland, a protected trust deed (PTD) is similar to an IVA in that it is a legally binding agreement between you and your creditors, whereby you make one, affordable monthly payment.