All you need to know . . .
What is a Debt Management Plan?
A Debt Management Plan (DMP) is a simple and straightforward solution to managing your money and paying off multiple debts. It is an informal, flexible payment agreement between you and your creditors. You make monthly payments that have been worked out to fit in with your financial situation, leaving you enough for important living costs like food, rent and utilities. All of your debt repayments are consolidated into one affordable monthly payment, on which some creditors will freeze the interest so that the full amount you need to pay back is not affected. You make one monthly payment, which is then distributed equally to your creditors. The DMP is managed by a licensed debt management company, who may contact your creditors on your behalf to ask them to agree to the DMP.
A straightforward solution to managing your money and paying off multiple debts. It is an informal, flexible payment agreement between you and your creditors.
A DMP is good for people who have a bit of extra money left over each month after paying basic living costs. If you can pay your priority debts such as mortgage, rent and council tax but are struggling with paying off non-priority debts like credit cards and store cards, then a DMP would suit you.
If you are interested in finding out more about DMPs, the debt management experts at Refresh Debt Services will be happy to offer you FREE advice. Call 02841 54200 or complete the online form on this page.
What are the benefits of a DMP?
There are many great benefits to having a DMP not least helping you begin to pay off your debts. It allows you to make regular payments, worked out according to your individual financial situation, which you can easily afford, allowing you enough money for a reasonable standard of living. You will have better control over your finances.
It simplifies your debt by paying off multiple debts through one monthly payment, which gets distributed to multiple creditors. There is no limit to the number of creditors the plan can cover.
A DMP is not a loan – there is no need for a further credit agreement, keeping you from getting even deeper into debt. If you take out a DMP there are many creditors that will freeze the interest on your loan and stop any penalty charges while you are making payments through the DMP.
Another advantage of a DMP is that you do not have to declare yourself insolvent or bankrupt so there are no serious legal consequences if you follow through with the DMP.
You can have peace of mind knowing that your debts are being repaid and you don’t have to worry about being contacted by creditors or debt collectors as long as you stick to the plan.
What are the drawbacks of a DMP?
With a DMP you make repayments over a longer period of time until all your debts are repaid. This may increase the total amount you have to repay if your creditors have not frozen the interest. Also, a note will be added to your credit profile and may affect your credit rating for six years from the time you began the DMP, thus lowering your chances of being granted credit in the future.
A DMP is an informal agreement and not legally binding on your creditors, so they are not obligated to agree the plan. They can still contact you if you default or are late making payments. Your creditors could still take further legal action to get the money from you and there could be other costs. Therefore this solution may not get the bailiffs off your back. Also, not all creditors may agree to stop interest and charges on the loan, meaning that you may end up paying more in interest.
The debt is not written off and you will have to repay the total amount owed to all your creditors.
Although there is no limit to the number of debts you can cover on a DMP, each case is looked at on an individual case-by-case basis. If it is noted that your income is disproportionately lower than the amount of debt you are in, it may be difficult to get a DMP agreed.
A DMP will only cover non-priority unsecured debts, so you will need to ensure that your secured loans such as mortgages are covered.
If you would like to discuss the pros and cons of a DMP with a Refresh agent, call 028417 542 00 or use the online contact form on this page.
How to apply for a DMP
Call Refresh Debt Solutions in the first instance if you would like to apply for a DMP. An agent can offer you free advice on managing your finances and give you some information about DMPs. You will be introduced to a reputable licensed debt manager who will be able to set up the plan tailored to your means. You will need to supply the debt manager with details of your finances, such as your income, assets, debts and creditors, which they will review with you, helping you to work out what money you have coming in and going out so that you can agree on an affordable monthly repayment amount. It is a quick and easy solution, which helps you to take control of your finances for a future free of debt.
Apply now by calling 028417 542 00 or use the online contact form on the right.
How much will I have to pay for a DMP?
DMPs are set up by private licensed debt management companies and each individual company may charge a different set-up fee, but there are many reputable companies that do not charge any initial set-up fee. You will have to pay a fixed monthly handling fee payable to the company managing the DMP for you. The fee covers the day-to-day management, dealing with correspondence, distribution of your payments to your creditors and undertaking regular reviews of your financial situation. This fee could be a fixed monthly payment or a percentage of your disposable monthly income, whichever is the lowest.
The amount you pay back each month is usually calculated on the difference between the money you have coming in each month and your basic living costs. This amount is called disposable income, and it is the amount you will be expected to pay each month. If there is any change in your disposable income, whether it is due to a pay rise, or a job loss, this will be reviewed with your DMP manager and you can change the amount you are paying back.
If you are experiencing financial hardship and can no longer afford the repayments you can contact your debt manager who may be able to find a solution and revise the plan.
Should you come into some money, you may wish to pay off the debt in full and stop the DMP, or you could cancel the plan and return to your normal monthly payments to your creditors.
Who is eligible for a DMP?
In order to qualify for a DMP you need to fulfil certain criteria:
- You must be in debt to at least two different creditors.
- The debt must be more than £2,500 in unsecured loans.
- Your disposable monthly income must be at least £80 and your contractual payment must be higher than your disposable monthly income.
Even if you have a bad credit rating you should be allowed to have a DMP, as long as you fit the profile above.
If you fall into these categories it may be that a DMP is the right debt repayment solution for you. To find out more about setting up a DMP give Refresh a call on 028417 542 00 or fill in the online form on this page.
What type of debt can be covered by a DMP?
DMPs can only be used to pay off non-priority unsecured debts such as personal loans, credit cards, catalogue accounts and store cards. You cannot use a DMP for a secured loan such as a mortgage.
Is my home at risk if I take out a DMP?
A DMP is an alternative to bankruptcy and it is not a legally binding document, so your home and property will not be at risk if you continue to make the payments agreed in the DMP.
Need more advice?
If after reading this you think that a DMP would be the right sort of debt repayment plan for you, get in contact with Refresh Debt Services to discuss the pros and cons of using a debt management plan to get out of debt.
Call now on 028417 542 00 or use the contact form on this page.