It’s important if you’re are struggling with debt that you look into alternative ways of clearing the money you owe and don’t worry, you’re not the only one – at the end of March 2016, people in the UK owed £1.474 trillion! One such way could be taking on a DMP (debt management plan). But while you might loosely understand what this entails, here’s everything you need to know about taking one out:
So what is a DMP?
A DMP is an informal debt management plan, that is not legally binding, but allows those who owe debt to consolidate everything into one easy to manage repayment schedule.
It does not guarantee that interest and charges will be frozen, so be prepared to continue paying these but it does ensure that creditors are aware of your situation and will be paid back in full once the plan is complete – which is a case of when all the money has been paid it’s over.
Is it worth it?
Definitely! If you are struggling with several creditors all harassing you several times a day for money, a DMP allows you to deal with them in just one manageable monthly repayment. You will need to seek the services of debt management specialist to set up this sort of plan, but this also means you won’t have to contact your creditors directly and once the DMP is set up simply sit back and let the repayments leave your account each month.
So what benefits does a DMP offer?
The main benefit of taking out a DMP instead of an IVA or declaring bankruptcy is that there will be no formal insolvency proceedings marked against you. There is also no obligation to release your assets to your creditors for equity – an IVA, for example, may require you to remortgage your home – so there’s minimal risk when it comes to your property and other assets, offering peace of mind for you and your family.
It’s worth bearing in mind, though, that a DMP will affect your credit score and you will have to work to build this back up again once the plan is over. However, you do have the benefit of not being outed on a public register, like you do with an IVA. A DMP does not restrict creditors from amending policies or demanding more charges, so this is worth also bearing in mind.
Debt management experts at payplan.com believe every debt situation calls for a different solution, so while one person might get along with a DMP, another might struggle and require an IVA which guarantees a freeze on the interest and charges on their debt.
It’s important before you undertake any debt management plan that you seek advice from an expert and ensure you understand the implications should you not be able to meet the requirements of the plan.