Debt Management Plan- What are they and how do they work?

Debt Management Plan (DMP):

A debt management plan is setup by designated third party, it’s a structured repayment plan, helping the debtor to repay the debt. The purpose of debt management is to help pay down debt at a reduced level over a specified period to facilitate the debtor make a fresh start with their finances.

How Debt Management Plan works?

Debt Management Plans Work if you cannot afford to pay your current monthly payment to creditors. The plan will allow you to make lower payments on credit card debt by reducing the interest rate and the outstanding balance. Thus, the arrears are settled, but at a much lower amount than was originally due.

If you decide that a debt management plan is good for you, then you can make your own plan or call a debt management company or a credit counseling agency that can work with you and help you to create a plan, provide advice and arrange payments with your creditors. Choosing the plan that works best for you depends on the time, money and dedication you want to dedicate to implementing the plan.

The company managing the plan will negotiate on your behalf to obtain better interest rates and better terms than anything else. They will also stop the harassment of creditors' appeals so that you can focus on finding ways to pay off debts and not worry about threats.

Which debt can I pay off with the debt management plan?

You are only able to use Debt Management Plan (DMP) for non-priority debts.

These include:

• Overdrafts
• Personal loans
• Bank or building society loans
• Money borrowed from friends or family
• Credit card
• Store card debts
• Payday loans
• Catalogue,
• Home credit
• In-store credit debts

Which debts are not able to pay off with a Debt Management Plan (DMP)?

•         TV License
•         Court fines
•         Council Tax
•         Gas and electricity bills
•         Child support and maintenance
•         Income Tax, National Insurance and VAT
•         Mortgage
•        Rent
•         Any loans secured against your home
•        Hire purchase agreements

Free advice about a Debt Management Plan(DMP):

It is always best to talk to an experienced debt advisor before deciding to subscribe to a debt management plan.

Indeed, the debt solution that suits you best depends on your personal situation. Free debt counselors can help you make the right decisions, which means you could be debt free sooner than expected.

A debt advisor will:

·        Treat everything you say with confidence

·        Give advice on better ways to manage your money

·        Never judge yourself and do not feel bad in your situation

·        Suggest ways to manage debts that you may not know

·        Always be happy to talk to you, whether your problem is big or small

·        Verify that you have applied for all the benefits and rights available to you

  You may only need a conversation with an experienced debt advisor to make sure your debt management or debt cancellation plan is right for you. If you need more help or if you do not know where to start, you are not alone.

Nearly half of those in debt told us that they were unsure of the best way to repay their debts. This is where a debt counselor can really help you.

More than eight out of ten people who have been warned of being in debt tell us that they feel less stressed or anxious and have better control over their lives.

People who let their debts accumulate before asking for advice often find:

·        Their cards are at most

·        No one else is lending them

·        Things have degenerated, and

·        It takes a lot more time to pay back what they owe.

You can contact a debt counselor in the way that best suits you - online, over the phone, or in person.