A Debt Management Plan is an informal agreement between you and your creditors that has been negotiated, usually by a third party, to lower the monthly payments being paid to your creditors. This isarranged on your behalf by a third party which can either be a debt charity or a fee charging company. If you chose to use a fee charging company, there will usually be set up fees and a monthly management fee which will normally be included within your monthly payment.
May not be suitable in all circumstances. Your credit rating may be affected. Fees apply on successful applications which will be advised and built into your payment plan.
If you wish to see if you are eligible for a Debt Management Plan, our expert team of Advisors are here to help.
You could include the following debts:
10 reasons why a Debt Management Plan may help you
A Debt Management Plan offers several benefits, particularly for individuals struggling with multiple debts. Here are some of the key advantages:
Simplified Payments: Consolidates multiple debt payments into one single payment. This makes it easier to manage finances as you only need to keep track of one payment each month instead of multiple due dates and amounts.
Reduced Interest Rates: Many plans negotiate with creditors to lower interest rates on debts. This can lead to significant savings over time and can also help in paying down the principal amount faster.
Waived Fees and Penalties: In some cases, creditors may agree to waive late fees or over-limit fees as part of the agreement. This can further reduce the overall debt burden.
Helps Avoid Bankruptcy: For those considering bankruptcy, it can be a viable alternative. It allows you to pay off debts without going through the bankruptcy process, which can have long-lasting negative impacts on your credit score.
Structured Debt Payoff Plan: A DMP provides a structured plan for paying off debts, usually over a period of 3-5 years. This structured approach can be more manageable and less overwhelming than trying to tackle debts individually.
Credit Score Improvement: By making regular, on-time payments through a DMP, you can gradually improve your credit score. Consistent payment history is a key factor in credit scoring models.
Financial Education and Support: Many DMP providers offer financial education and counseling services. This can help you develop better budgeting and money management skills, reducing the likelihood of falling into debt again in the future.
Stress Reduction: Dealing with multiple creditors and juggling various debts can be highly stressful. A DMP simplifies this process and can provide peace of mind, knowing that there is a plan in place to become debt-free.
Creditor Cooperation: Since DMPs are often administered by credit counseling agencies, creditors may be more willing to negotiate and cooperate, recognizing that you are making a good-faith effort to repay your debts.
Stop Collection Calls: Once you are on a DMP and making regular payments, creditors and collection agencies typically stop their collection calls, reducing harassment and stress.
It’s important to note that while DMPs offer these benefits, they may not be suitable for everyone. It’s crucial to assess your financial situation thoroughly and seek professional advice before deciding on a DMP.
