What is a Debt Management Plan (DMP)?

Are your debts overwhelming you? Can you no longer afford to make the minimum payments on your loans and credit cards but don’t want to take any measures that will mean declaring insolvency or bankruptcy?

Then a Debt Management Plan could be what you need to get your life turned around and back on track.

Debt Management is simply a plan agreed between you and your lenders to pay back your debts at a reduced rate and over a longer period of time. Essentially you are making new credit agreements to replace your original ones.

The debt management company takes care of all the negotiations with your creditors, so you no longer have the stress or hassle of dealing with them, and can often get you more favourable payment terms than if you tried to sort everything by yourself.

What are the benefits of Debt Management Plans?

• Your monthly payment is only what you can afford after your living expenses have been paid.

• Interest and charges are often frozen, which can save you money in the long-term

• You do not have to declare insolvency as you would if you took out a Trust Deed or IVA.

• You are given the opportunity to repay your debts in full

• You do not have the stress and hassle of dealing with creditors

• A debt management plan can teach you valuable financial skills for the future

Are you eligible for a Debt Management Plan?

To be eligible for setting up a Debt Management Plan your should:

• Have at least £100 left over after your essential living expenses have been paid. Essential expenses include mortgage or rent, utility bills, council tax, secured loans and hire purchase agreements, food, travel expenses, student loans and child support.

• Have unsecured debts of more than £5,000. Secured debts cannot be included

• Have 2 or more debts

• Be willing to spend the effort living within your means and sticking to a budget for the length of time your Debt Management Plan runs

Do you need a Debt Management Company?

While the concept of a Debt Management Plan sounds very straightforward, in reality there are many complex factors involved that can make using a debt management company essential.

1. The lenders are used to dealing with them and will often offer them a better deal than you might have got otherwise
2. Debt Management Companies know the right people to speak to get the best result
3. Lenders rarely attempt nasty negotiating tactics and they know they are dealing with a professional company licensed by the Office of Fair Trading.

Sceptical?

If you are sceptical about using a Debt Management Company to help you with your debts read our section on 'How not to get conned by a Debt Management Company'. This will give you an insight on what to look out for when dealing with such firms.

For more information on whether a Debt Management Plan is right for you call now and speak to one of our advisers on 0800 043 2027 or see if you qualify with our free Debt Calculator here.