UK Debt Management Plan or DMP
What is Debt Management Plan or DMP?
Debt management is a repayment agreement between the debtor and creditors. In a debt management plan both the parties agree upon a monthly repayment amount over a certain period of time. The debt management programme helps the debtors to pay off unsecured loans in an organized way. top
Advantages of a debt management plan:
- No need to get a new loan to repay old debts
- Freeze or reduces the rate of interest and other changes on the loans
- Accumulate all loans into a single monthly repayment amount
- Avoid extra charges for late payments
- Normally stops harassment from your creditors
Disadvantages of a debt management plan:
- The creditors do not have any legal obligation to accept a debt management plan
- It is not a legal agreement and thus the creditors can withdraw from the agreement anytime.
- It normally takes long to get out of debt
- May affect your credit score
The debt management process:
The first step is to find out a good debt management company or a debt negotiator who will talk to your creditors on your behalf.
The debt management company will asses your financial situation. They will work with you to draft a realistic debt repayment plan. It will include how much money you can pay every month to pay off the debt amount.
Once the repayment plan is ready, the debt management company will start negotiating with all your creditors to settle your debt. They will try to freeze or reduce interest rates, penalties etc. The reduction depends on the experience and quality of the debt management company or the debt negotiator.
Once everything is settled, you will deposit the agreed amount in your debt management company’s account regularly. They will pay the creditors as and when you have accumulated fund.
Can you manage your own debt?
Sure you can. Contact your creditors, tell them about your financial condition and offer them a suitable repayment plan. You must be really good at negotiation. However, keep your nerves strong while dealing with creditors. Here are some common questions and answers on debt management that you may like to read
Is debt management the best solution for me?
It entirely depends on the nature of your debt and your financial condition. However, in general, you may choose a debt management plan if;
- you have unsecured loans (Personal loans, credit card loans, store cards, catalogues, overdrafts) that you cannot repay according to schedule
- you have some surplus income to repay your debts under changed conditions or repayment options
- you do not want to put your home or other assets at risk like a debt consolidation plan
- You have 3 or more creditors to repay
- Detailed article
We will recommend you to consult a debt advisor for proper debt management advice and help depending on your situation before you take any step. He or she will be able to guide you better depending on your financial status.
And always remember that there is no quick fix to debt problems. If someone advocates a miracle solution that will remove all your debts immediately, stay away from him or her for your own good. top
