Is A Debt Management Plan Right For Me?
A Debt Management Plan (DMP) is an informal agreement between you and your creditors where you agree to reduce your monthly repayments so that all the debts can still be repaid, but over a longer period of time.
Compared to something like an IVA, which is a lot more formal, a DMP is almost like a handshake agreement with your creditors.
The purpose of a DMP is to allow you to control your spending and it can also stop you from taking out yet another loan to consolidate all those debts.
It basically gives you a more controlled plan to clear all your debts once and for all.
There are several advantages and disadvantages to a Debt Management Plan that need to be consider before you take the plunge.
Advantages 1.
Pay just one single low monthly payment.
This will enable you to keep a tighter control on your debts and no longer ignore or forget creditor payments.
2.
No more additional borrowing to pay of all your debts.
With just one payment each month you wont need to take out additional consolidation loans.
3.
No more using one loan to pay off another loan and effectively papering over you debt problems.
Disadvantages 1.
You have to pay off all your debt and as you will be making reduced monthly payments then you will have the debt for a much longer period of time.
2.
If you default on any repayments then this will show up on your credit file.
This in turn can cause you problems when you want to apply for credit in future years.
3.
Any secured debts that you currently have in place cannot be included as part of the DMP.
Those secured debts include your mortgage payments, any HP payments on a car etc.
The debts cover mainly unsecured loans, credit card and store card debts.
Getting yourself into some formal of DMP can either be done by yourself or it can be handled by a professional.
Doing it yourself will obviously cost less but you then have to be willing and able to deal with your creditors, who may well be quite hostile to taking on reduced payments.
If you do your research online you can find lots of support and advice on how to deal with creditors and the best way to negotiate for reduced payments.
Doing it yourself will certainly educate you more on controlling debt so although it will be a lot of hassle and stress in the short term it has a lot more added benefits in the long run.
And if you decide to use a debt advisor then expect to pay an initial DMP setup fee plus a monthly management fee as they will handle the payment of the creditors and any follow up that is required during the debt repayment period.
Overall you should consider a DMP if you have unsecured debts of £15,000 or less and you could control your ongoing spending.
There is no point in taking on a Debt Management Plan if you are going to spend money, which should be going toward paying off your debts.
Compared to something like an IVA, which is a lot more formal, a DMP is almost like a handshake agreement with your creditors.
The purpose of a DMP is to allow you to control your spending and it can also stop you from taking out yet another loan to consolidate all those debts.
It basically gives you a more controlled plan to clear all your debts once and for all.
There are several advantages and disadvantages to a Debt Management Plan that need to be consider before you take the plunge.
Advantages 1.
Pay just one single low monthly payment.
This will enable you to keep a tighter control on your debts and no longer ignore or forget creditor payments.
2.
No more additional borrowing to pay of all your debts.
With just one payment each month you wont need to take out additional consolidation loans.
3.
No more using one loan to pay off another loan and effectively papering over you debt problems.
Disadvantages 1.
You have to pay off all your debt and as you will be making reduced monthly payments then you will have the debt for a much longer period of time.
2.
If you default on any repayments then this will show up on your credit file.
This in turn can cause you problems when you want to apply for credit in future years.
3.
Any secured debts that you currently have in place cannot be included as part of the DMP.
Those secured debts include your mortgage payments, any HP payments on a car etc.
The debts cover mainly unsecured loans, credit card and store card debts.
Getting yourself into some formal of DMP can either be done by yourself or it can be handled by a professional.
Doing it yourself will obviously cost less but you then have to be willing and able to deal with your creditors, who may well be quite hostile to taking on reduced payments.
If you do your research online you can find lots of support and advice on how to deal with creditors and the best way to negotiate for reduced payments.
Doing it yourself will certainly educate you more on controlling debt so although it will be a lot of hassle and stress in the short term it has a lot more added benefits in the long run.
And if you decide to use a debt advisor then expect to pay an initial DMP setup fee plus a monthly management fee as they will handle the payment of the creditors and any follow up that is required during the debt repayment period.
Overall you should consider a DMP if you have unsecured debts of £15,000 or less and you could control your ongoing spending.
There is no point in taking on a Debt Management Plan if you are going to spend money, which should be going toward paying off your debts.
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