Top five questions about… Debt Management Plans.
Written by Matthew Brown on 28 January 2013
A Debt Management Plan, or a DMP, is an informal agreement between you and your creditors. When looking for a suitable solution for your debts it can be a daunting experience and many people contacting us have lots of questions. Below we have put together five common questions that we get asked.
How long will my Debt Management Plan (DMP) last?
The length of your Debt Management Plan depends on your individual situation. It also depends on your level of debt and monthly surplus. If creditors freeze interest and charges, the length of the Debt Management Plan can be dramatically reduced.
For example: If you owe £25,000 and you can afford to pay £250 per calendar month the DMP will last for just over 8 years (100 months). This applies only if the payments are maintained each month and the creditors freeze interest for the duration of the plan. Your DMP can be completed sooner if your circumstances improve and your payments can be increased.
How much does it cost to set up a Debt Management Plan (DMP)?
Nothing if you choose Payplan, it’s completely free. As you may know there are many debt management companies that charge by either requiring a start-up fee or a monthly management fee, which can be anything from 15% – 17% of the monthly payment.
Payplan are funded by the credit industry, which allows us to offer completely free Debt Management Plans. This means whatever you can afford each month goes directly to your creditors to reduce your level of debt even quicker.
For example if you can afford to repay £250p/m all of that money will be distributed to your creditors pro rata, Payplan takes nothing out; the full £250 per month will go towards paying your creditors off.
Can I stop my Debt Management Plan (DMP) when I like?
A Debt Management Plan is an informal arrangement between you and your creditors, so you are free to stop the DMP at any time, but we ask that you provide as much notice as possible so we can inform all of your creditors.
If you are experiencing further financial problems and cannot afford the current DMP payments to Payplan, please let us know because we may be able to restructure the Debt Management Plan for you.
Please note: Bear in mind that once the DMP is cancelled, creditors may well resume interest and charges that had previously been frozen or reduced.
Is my credit rating affected if I enter into a Debt Management Plan (DMP)?
A DMP in itself will not show on your credit file, however, if you have recently been experiencing financial difficulty (missed repayments) then your credit rating is likely to have been affected already by this.
To explain this further; whenever the full contractual payment isn’t made, whether this is through a DMP or not and even if the payment is just a few pounds short, it will still affect your credit rating because, if your Debt Management Plan repayment is less than the required repayment as originally agreed, then you are not complying with the original credit agreement you made.
What support do I get during my Debt Management plan (DMP)?
Payplan prides itself on giving excellent support to all our clients. Throughout your Payplan Debt Management Plan arrangement you will have a DMP case officer who will give you a direct number and an email address so you can keep in contact.
If your financial situation changes, you can talk to your DMP case officer who will assess your circumstances and, where appropriate, try and rearrange your Debt Management Plan around your circumstances.
Our members of staff are always there to give support and answer any questions you may have about Debt Management Plans or any other more appropriate debt solutions.
Filed under Debt Facts