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How is my DMP payment worked out?

  This advice applies to people living in England, Wales, Scotland and Northern Ireland who are on a DMP.

Your debt management plan (DMP) payment is shared among all your debts. To work out how much each one gets, we look at your budget, how much you agreed to pay when you took them out and the amount of time you agreed to repay the debt in.

Your budget shows us how much money you have left over after you have paid your bills and living costs. This is called your surplus.

The amount you agreed to pay to a debt when you first took it out is called a contractual payment.

The amount of time you agreed to repay a debt in is called a term. Usually, a longer term means you make lower monthly payments.

How we work out what each debt is paid

It is our job to make sure that each debt included in your DMP is paid a fair amount of your monthly payment.

To do this, we look at the contractual payment of each debt and what type of debt it is.

While making payments to your DMP, you might notice a couple of things:

  • The amount of time you agreed to repay a debt in is reflected in your DMP: A debt with a term of five years will be paid off before a debt with a term of 10 years
  • Some debts will be paid off before others: These debts will drop off your DMP when they are paid in full. This frees up more of your DMP payment to be paid to the other remaining debts
  • The lowest amount we pay to a debt is £5: None of your creditors will get a payment lower than this

Why don't StepChange pay off my smallest debts first?

It is important that we treat each of your creditors fairly. If we paid off your smallest debts first, your other creditors could see this as favouritism.

When we treat your creditors fairly, they are more likely to:

  • Agree to your DMP
  • Accept lower payments
  • Consider stopping interest and charges

Think about it as a process of working towards paying off all your debts in one go, rather than focussing on one at a time. Keep in mind that being debt free is the goal.

How we work out payments for different types of debt

We work out your payments based on five percent (5%) of what you owe. 5% is the average amount for agreed payments on overdrafts, store cards and catalogues.

This is an estimate of the amount you need to pay to cover your minimum payment, plus extra to pay the debt off in a reasonable time.

It is likely each account will have a different minimum payment amount. But we use 5% to make sure they are treated in the same way.

Example:

  • You owe £100 on an overdraft
  • 5% of £100 is £5

We round up to the nearest pound.

We work out your payments based on three percent (3%) of what you owe. 3% is the average amount for agreed payments on credit cards.

This is an estimate of the amount you would need to pay to cover your minimum payment, plus extra to pay the debt off in a reasonable time.

It is likely each credit card will have a different minimum payment amount. But we use 3% to make sure they are treated in the same way.

Example:

  • You owe £100 on a credit card
  • 3% of £100 is £3

We round up to the nearest pound.

Payday loans work a bit differently to other debts.

Your agreed payment will be the total amount of your debt. So, if you owe £100 on a payday loan, your agreed payment will be £100.

On a DMP, the amount your payday loan gets will be based on five percent (5%) of what you owe. This is to make sure they are treated the same as your other creditors.

Example:

  • You owe £100 on a payday loan
  • 5% of £100 is £5

With these types of debt, your agreed payment amount will have been set by you when you took out the debt.

Example:

  • You owe £100 to a loan
  • You agreed to pay back £10 a month

We will use an average if your agreed payments change each month.

If you are not sure what your agreed payment is, check any paperwork you have about the debt. Or you can get in touch with your creditor and ask them.

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"Thanks for helping me take control."

"Straight forward and easy to understand advice. StepChange made it very easy for me to get a DMP in place and finally get some control over my finances. Friendly and professional advisors and a great service offered."

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