- 1 What Is A Debt Management Plan?
- 2 Advantages Of A Debt Management Plan
- 3 How A Debt Management Plan Helps You
- 4 Does A Debt Management Plan Show Up On My Credit File?
- 5 Do Debt Management Plans Actually Work?
- 6 Is A Debt Management Plan An IVA?
- 7 Can I cancel a debt management plan?
- 8 How Do I Get Started On A Debt Management Plan?
What Is A Debt Management Plan?
A Debt management plan is a type of informal financial arrangement that enables people facing debt to have re-arranged repayments in order to make their debt (and monthly repayments) more manageable.
The idea with this type of debt solution is to help people with unmanageable unsecured debts to attain a more manageable system that can not only reduce their monthly repayments but also reduce their debt over an (often short) period of time.
100,000s of people at some stage or another have made use of DMP’s as a solution to their financial circumstances and have benefitted as a result of being enrolled on these debt arrangements.
Advantages Of A Debt Management Plan
– Frozen interest on outstanding debts, often the interest on common debts such as credit cards, mortgages and loans have the interest frozen.
– Halt in creditor hassle, often creditors are advised that the debt is now being managed by a third party and therefore they have a new point of contact for chasing payments (the debt management company managing the debts)
– More manageable monthly repayments
– Enables the debtor to live a more normal life again, giving them relief of hassle
– Can halt bailiff procedures designed to recover the debt as the repayments are being renegotiated and made to be more manageable.
How A Debt Management Plan Helps You
Basically your monthly outgoings are consolidated into more manageable monthly repayments, so if you are currently paying £650 per month out to creditors for debt repayment and this is unaffordable to you, there is every chance under a debt management plan this payment can be rearranged to £150 per month making your monthly outgoings much more realistic and easier to deal with.
There are other ways in which a DMP can benefit you, it can stop bailiffs pursuing you for debt because the repayments have been renegotiated (bailiffs tend to pursue debts more aggressively if they are being ignored or if there has been no repayment contribution whatsoever, so having a dedicated debt management adviser dealing with the creditors on your behalf and communicating with them can be of benefit to anyone facing debts).
Interest On Debts Frozen:
Through a debt management plan it is possible to freeze the interest on debt repayments, this is helpful because it means that whilst the debt may be outstanding (still needs to be paid) the sum that needs to be repaid wouldn’t constantly be increasing due to the interest or (APR) constantly increasing the balance of debt over time.
Interest on debts can be frozen often by negotiation from advisers’ who make contact with the creditors’ on your behalf to renegotiate the debt repayment arrangement, the advisers’ handle this so the responsibility of doing such is taken out of your hands for your peace of mind.
Does A Debt Management Plan Show Up On My Credit File?
A debt management plan will show up on an individuals’ credit file, however this does not neccesarily prevent people from gaining any form of credit in the future, as completing a debt management arrangement should help to rebuild credit as it shows a commitment to the repayment of debt, and provides creditors with repayment from a customer that may have otherwise gone bankrupt.
In short, people who have completed debt management plans successfully have still been able to obtain credit of all types in future, so this should not be a deterrent for someone in debt needing professional help and management to help them get out of it.
It is a solution that is often much better than alternatives (borrowing more credit with a high APR (debt consolidation loans) or going bankrupt, or letting the debt get worse (burying your head in the sand)).
Note: Simply ignoring your personal debts can have escalating consequences and is not something we would recommend you do, if you feel the need to seek help we recommend that you do so at the earliest opportunity.
Do Debt Management Plans Actually Work?
If someone enrols on a debt management plan and stays committed to the repayments, not only can it make life easier in the short term, but it can help them get a fresh start.
For purposes of “management of debt” debt management has been a proven success for 10,000s of people in the UK and is an informal solution that is accessible for those with an income and debts they would like to consolidate without the need to take out further credit (and potentially getting themselves in more trouble financially).
Many people would attest to the effectiveness of DMP’s for these purposes, and debt management is used by individuals all over the United Kingdom.
Is A Debt Management Plan An IVA?
No. A DMP is a different product to an IVA (an IVA is a more formal debt solution for people in substantial debt (generally more than £5,000 of debt but exceptions can be made) for more information on IVA’s see this page.
More standard debt management is a less formal arrangement to clear debt.
Can I cancel a debt management plan?
Before the DMP is finalised it’s easy to back out of the arrangement if you’re having doubts, however it’s recommended that you give the matter careful consideration before coming to any conclusions that could result in any financial issues being ignored.
It is possible to exit a debt management arrangement, but this may or may not be recommended, especially if the plan is working for you & the debt repayments have been renegotiated with the creditors, exiting the debt management plan may make matters’ worse.
There may be some circumstances where a debt management plan can be cancelled (for example if your personal circumstances change for the better or if you benefit from a financial windfall), this is the usual way in which such an arrangement is exited early.
In some cases it may be possible to ask the creditors’ for a settlement figure that may be a reduced repayment sum in exchange for clearing the debt faster, this is another possibility through a DMP.
How Do I Get Started On A Debt Management Plan?
To apply for a debt management plan or to see if you qualify, use the form to the upper right hand side of the page now.