Could A Debt Management Plan Help?
What are DMP's or Debt Management Plans?
If you've ever been faced with debts of over £1500, with one or more creditors, a debt management company could arrange a solution in the form a debt management plan.
It's important to understand the the benefits and downsides of a DMP so you are aware of the full impact of taking before making any such definite plans. Some creditors will more likely agree to a DMP especially if the outstanding debts are not too significant before something as drastic as an IVA.
If your creditors will agree to lower payments and freezing
any interest on debt owed, you will be able to breathe more easily and
have time to settle down enough to manage your finances.
DMP features:
- Reduction in monthly repayments
- All creditor negotiations are handled by the company
- A minimum monthly payment of £100 is acceptable in the majority of cases
DMP's work by allowing you to make a monthly payment which is affordable for you, based on your income and expenses (everyday living costs, e.g. mortgage, rent, children's needs, food). These costs are agreed with the creditors as part of guidelines set out. Your payment will be proportionately distributed to all your creditors, in proportion to their outstanding balances. The debt management company will usually take a monthly fee for negotiating and making arrangements with your creditors.
These types of plans are often a good solution particularly if you are a short-term personal debt crisis. There are a number of ways that a debt management plan can be arranged, usually it's from a company, however self-help and charitable debt help plans can also be used.
Debt Management Companies
These firms exist under the commercial debt management sector, and are very similar to 'self help' apart from the the fact that there is someone else managing your debt. Many of these companies charge a fee to administer your debt(s). Any firm operating commercially must not do so under the pretence of being a charity, however it must be noted that major credit card companies and banks often provide funding for charitable type organisations themselves.
Who are Debt Management Plans for?
Everyone has different circumstances, for instance the needs of a couple who about to lose their home because of breaches in of mortgages lenders terms, i.e. failing to pay their mortgage repayments, are quite different from a single mother struggling to pay her bills.
How much does it cost?
Firms often ask will ask you questions about how much you can afford to pay your creditors, and then reaching agreement with them to accept lower monthly payments so that you can pay off your debt. It's not just the charities that can arrange debt management plans, commercial companies can do this as well. Charities may give you advice on how to manage your debt, but can offer no help in how to distribute payments to your creditors.
Can self help debt management work?
Self help means that you can negotiate your payment terms with companies who you were money to. You may be able to approach creditors initially, Particularly if you do not have serious debt and they can deal with your problems. It's never a good idea to leave your debt for too long as it become much more difficult to negotiate with your creditors and they may even threatened legal action or add extra charges onto your debt. This is where debt management company can negotiate on your behalf and get you the best deal so you can cut down on the amount you have to pay out.
Find out about the best debt management plans in the UK today.