What is a Debt Management Plan?
A Debt Management Plan (DMP) is an informal agreement between you and your creditors which allows you to repay your debts in reduced payments that are more affordable for you.
It’s suitable for anyone struggling to make their contractual payments (the repayment amount originally agreed with their creditors) each month but who still has money leftover after they have paid for their essential living expenses such as household costs, travel and clothing.
Is a DMP right for me?
- It could be the right solution for you if you have unsecured debts and if you are struggling to make the repayments. All of your debt will be repaid and you won’t need to release any equity you may have in your home or other assets to your creditors.
- It might not be the right solution for you if you have a large amount of debt because it could take you a long time to repay it, depending on how much you can afford each month. At PayPlan we will advise you of all the available options and discuss whether there is an alternative solution that will get you out of debt quicker.
If you are unsure of what is the best option for you, contact PayPlan to discuss your options with our specialists either by phone or online.
How does a Debt Management Plan work?
A Debt Management Plan (DMP) is an agreement between you and your creditors to help you pay off your debt at a reduced monthly rate. This is set up and managed through a third party provider such as PayPlan. We don’t charge fees for our DMPs so every penny you pay goes towards your debts. Some companies do charge set up and management fees, so it’s worth doing your research beforehand.
Before setting up a plan, we will help you put together a budget that shows how much you can afford to pay to your debts after all your priority payments and living expenses have been covered.
Any money you have leftover after your essential costs are covered is the amount that you can afford to pay towards your debts. You will then make this one monthly payment to PayPlan and we will distribute it to creditors. This will be split ‘pro rata’ between them which means the creditor who is owed the most money, gets the biggest share of your monthly payment, and so on.
We’ve put together an ‘at-a-glance’ guide to help you decide if a DMP could be right for you:
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Benefits |
Considerations |
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At PayPlan, our DMPs are 100% free so everything you pay goes towards your debts. |
Your DMP will continue until the debt is paid back in full including repayment of interest and charges (if these are still charged). |
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You’ll make one, affordable monthly payment. This will be based on how much money you have leftover after we’ve put together a monthly household budget. |
You won’t have any legal protection from creditors regarding your debts. If this is a concern for you, then an Individual Voluntary Arrangement (IVA) may be a better option. |
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You’ll make the monthly payment to us and we’ll distribute this to your creditors on your behalf. |
A DMP is an informal debt plan, so creditors can continue to contact you and pursue further legal action if they choose to. |
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If you’ve fallen behind with your household bills, you can add any missed payments to your DMP to help get your accounts back up to date. |
Making reduced payments will affect your credit rating, even if your creditors are happy to accept your payments. |
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We will ask your creditors to freeze interest and charges so your debts don’t grow. Whilst this isn’t guaranteed, in our experience, most creditors do agree to this. |
If you receive any default notices, these will stay on your credit file for a period of 6 years from the date they were first issued. |
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You can manage your Debt Management Plan online and we’ll review it regularly to make sure you’re paying what you can afford. |
Getting a DMP with PayPlan
- You’ll first have an assessment with one of our specialists – we can do this over the phone or by email. This means that together we’ll go through your income and outgoings to work out how much you can realistically afford to pay towards yourdebts.
- If we feel that a DMP is the best solution for you and you are happy to go ahead, we’ll contact your creditors to explain your situation, and let them know the amount you’ll be paying them through the DMP.
- You’ll then make one payment to us each month and we’ll do the rest, paying your creditors the agreed amount. You can manage your DMP online through our secure Client Login area so you can keep a track of your debts reducing each month. It’s also a quick and easy way to get in touch if you have any questions about your plan!
To find out if a DMP could help you get your debts under control, call us today on 0800 316 1833 or get debt help online.