Is it Worth Paying for a Debt Management Plan?
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Keeping on top of your debts can be a struggle, especially if you’re borrowed money from multiple lenders. One solution you might be considering if a Debt Management Plan but is it worth it, or something you could do yourself?
What is a Debt Management Plan?
First off, what is a Debt Management Plan? A Debt Management Plan or DMP is an informal debt solution that could help you to organise your debts into one affordable monthly payment. This could be a good option if you’re finding it hard to meet your repayments currently.
You might be thinking, can’t I just do that myself? One of the biggest challenges, when you have several debts, is contacting all your different creditors, knowing how much you owe each one and budgeting for that. Sometimes this can become overwhelming, and we may miss other important bills or expenses. Taking out a DMP means you won’t have to deal directly with your creditors and an advisor will work with you to make a realistic budget – one that you’ll actually stick to!
Research can help you to understand your debts and how they work but having an expert – someone with years of experience – may make it easier for you, saving you time, effort, whilst giving you peace of mind.
So what are the pros and cons of a Debt Management Plan?
Advantages
Flexibility – A DMP is flexible and can be amended if needed. If you can no longer afford the agreed payments, an adjustment of how much you pay each month can be made.
Interest and charges frozen – In most cases, your interest and charges will be frozen so the amount you owe won’t keep going up and up.
Privacy – Unlike with an IVA or bankruptcy, your name will not be added to the insolvency list.
Stop creditors harassing you – If your creditors agree to the DMP, most or all communications should end.
Things to consider
Not legally binding – Creditors don’t have to accept a DMP, as it’s not legally binding. This means they don’t have to freeze charges and they are not obligated to agree to a reduced payment arrangement.
Non-Priority debts only – It will only include debts such as personal loans, credit cards, and store debts.
Credit score will be affected – It will negatively affect your credit score.
Another thing to bear in mind is the support you are going to get from the Debt Management Company. Struggling alone with debt can be a hardship for anyone and it can be beneficial to work with a Debt Management Company for assistance.
It may be that your circumstances change and you can afford to pay a bit more or it may go the other way and you can’t afford the agreed payment, either way, you need a debt management company that are flexible to changes in your circumstances and can offer you ongoing support should it be required.
Do you want to find out if a DMP could be right for you?
If you are unsure if a Debt Management Plan is the right option for you, our friendly team of experts are here to advise you. All of our advice in completely confidential and tailored to your specific circumstances.
If you need further support in your decision-making process, reach out, we are happy to help.
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