When to Consider a Debt Management Plan

When you’re in debt it can be difficult to know what to do next. Trying to sort out payments to different lenders, juggling calls from multiple creditors asking for money, trying to sort your priority debts from those that can wait…it’s stressful on paper, let alone in reality. Trying to handle all of this on your own can be extremely intense, especially if you owe a lot of money and are being contacted every day by more than one creditor. If this situation sounds similar to your own, it might be time for you to consider a debt management plan.  

What is a debt management plan?

A debt management plan (DMP) is an informal agreement between you and your creditors where you arrange to pay off your debts at a reduced amount through one single, affordable monthly repayment. This single monthly payment will then be split between your creditors relative to how much you owe each one. It may take you longer to pay your debts off, but it means you’ll be paying off what you owe at a more affordable rate than before.

How do I know whether or not I need a debt management plan?

It’s down to you. There’s isn’t an arbitrary point or criteria you have to reach to begin considering a debt management plan, so it’s best to use your own judgment. If, for example, you only owe a small amount of debt out and feel you’ve got it under control, and aren’t laid awake at night worrying about it, then you don’t need a debt management plan.

On the other hand, if you’re worried that you can’t afford to pay your debts, don’t want to answer the phone in case it’s your creditors asking you for money and are scared bailiffs are going to come to your house, then a debt management plan could be the right solution for you.   

How do I know how much I’ll be paying each month?

Your monthly amount will be based upon how much you can realistically afford to pay each month. We’ll negotiate between you and your creditors; this way, you’ll have an experienced, expert third party mediating so that both you and your creditors are satisfied with your monthly repayment amount. This will be a reduction on what you were paying before you entered into the DMP, allowing you to live comfortably whilst you repay your debts.

Are debt management plans flexible? What if I can’t afford repayments?

We highly advise that you stick to your agreed monthly payments if possible. This is because a DMP isn’t a legally binding debt solution, and your creditors can opt out of it at any time if they wish and continue pursuing you for money through other means. It’s highly unlikely they’ll do this if you stick to your agreed payment plan, however. If you do need to miss one payment, then you should let us know in advance so we can notify your creditors.

Do debt management plans cost money?

Some do, but ours don’t. We only offer our clients completely free debt management plans, with no hidden charges or catches. This way, all of the money you give us to pay your creditors goes towards paying off your debts – the way it should be. You can look at the costs of DMPs from different debt management plan providers compared to ours at Why Choose PayPlan?

Will my creditors be able to contact me in a debt management plan?

Yes. Whilst a debt management plan is a debt solution that your creditors may agree with, it doesn’t mean that they won’t be able to contact you whilst you’re in it. Protection from creditor contact, meaning that your creditors aren’t allowed to contact you by law is something that you’d get if you decided to opt into an Individual Voluntary Arrangement (IVA).   

Will a debt management plan affect my credit score?

A debt management plan will affect your credit score negatively, so it’s important to bear this mind when considering opting into a DMP. Whilst having a poor credit rating doesn’t mean you won’t be able to get any credit whatsoever, it does mean that some of the better deals on interest rates or repayments won’t be available to you. A DMP will remain on your credit file for a period of six years after you’ve completed your plan.

How long will the plan last?

There’s no set time limit on a DMP. It will last until your debts are fully repaid, or until you/your creditors decide to end the DMP and settle your debts through some other means or debt solution.

How do I know if this is the best debt solution for me?

You’ll know because we don’t offer any debt solutions to anyone unless we’ve got a full, complete view of their financial situation and lifestyle circumstances. Whether you speak to one of our expert advisers via a call to our helpline team or get your debt solution online through PlanFinder, we take the time to carefully assess your overall situation. It’s what allows us to give every one of our clients the debt solution that suits them, and helps them, the most.

It might be the case that a DMP isn’t the best debt solution for you. You might be more suited to an IVA, a Debt Relief Order (DRO) or one of the other debt solutions we offer. Regardless of your circumstances, we’ll always explain exactly why the debt solution we’ve picked is best fit for you. 

To find out what debt solution could help you the most, call our helpline team today on 0800 316 1833 . If you’d prefer to get a debt solution online,  using PlanFinder, our online debt solution tool.