How Debt Management Works
"I make one payment a month, life is so much easier. The mortgage company is happy and the credit card companies have stopped ringing."
If you are under pressure and struggling to meet your monthly repayments then a Debt Management Plan (DMP) could be the answer. By constructing a realistic budget plan we will establish what you can afford to pay your creditors each month.
We make sure that your mortgage or rent payments take priority and that other essentials (such as council tax and utility bills) are also taken care of. We then approach your creditors on your behalf and explain the situation and how much you can afford to pay them.
A Debt Management Plan is a great solution and will normally freeze any interest on your debt which allows it to be cleared quicker. The red letters and calls should stop and with only one monthly payment to think about life should be much easier.
Debt Management is ideal for those with less than £15,000 of debt and can be set up very quickly. If you have more than £15,000 of debt than a Debt Management Plan could take too long and by writing off some of your debt an IVA could be much better.
At Debt Trust UK we aim to give people the facts, so here are some of the key features of debt management (good and bad) to consider:
- To qualify for a Debt Management Plan (DMP) you would normally need to have at least £2,000 of unsecured debts and owe money to at least two companies. If you can also afford £100 a month then you would probably be approved. Don’t worry if you haven’t got £100 spare as we should still be able to help by recommending an alternative solution. e.g. token payments.
- A Debt Management Plan will be reflected on your credit file but as it is not a formal arrangement (like bankruptcy or an IVA) then the impact is limited. Normally people have missed payments and defaults on their file already so their credit score is fairly low already.
- A Debt Management Plan is less risky and more flexible than an IVA. As an IVA is a legal contract if you are unable to pay you could be made bankrupt. Debt Management is informal and ideal for people who have had a sudden change of circumstances or have irregular income. It will buy you some time and as soon as things improve you can return to normal payments.
- If you have assets (equity in your home or an expensive car) then a Debt Management Plan is probably the solution. Unlike bankruptcy or an IVA creditors do not have to be informed of such assets and therefore they remain protected.
- A good debt management company should continually review your circumstances (at least every 12 months) to make sure the plan is affordable. Having a trained debt advisor looking after your finances can be very helpful as ways to reduce expenditure or increase income (e.g. tax credits) can be highlighted.
If you are considering a Debt Management Plan then why not complete our free 1 minute debt test. We can then confirm that you qualify and if it is the best way to clear your debt.
Is Debt Management The Solution? Try Our Free Assessment & Find Out
