How is a monthly DMP payment worked out?
Only by taking a look at your budget can a DMP provider work out how much you can pay towards your debts
each month. Your
priority household bills and living expenses are most important, and it’s the money left over after paying these costs that goes into your monthly DMP payment.
Debt advice charities don’t charge a fee for setting up and overseeing your DMP. However, there are some fee-charging companies that will add a fee to your monthly payment.
The monthly DMP payment must leave you with enough money to cover your living costs and a reasonable quality of life for you and your family.
Is a DMP like a consolidation loan?
No. A DMP is a payment arrangement that’s based on the amount of money left over after your household bills and living expenses are covered.
A consolidation loan is a form of credit that you take out in order to pay off the debt you already have.
Is a DMP legally binding?
No. You can stop your DMP at any time, and you don’t have to make a legal commitment when starting a DMP.
You usually need to sign a DMP agreement form. This gives the DMP provider permission to contact your creditors on your behalf. However, the agreement’s not legally binding.
Will a DMP affect my credit rating?
Each debt that’s been included in your DMP can have a ‘payment arrangement’ note added to it. This is sometimes known as a ‘DMP flag’. A creditor can only add a DMP flag to your debt if they accept how much you’re paying them each month through the DMP.
There isn’t a specific place in your credit report that notes whether or not you’re on a DMP.
Your DMP payments are usually lower than the minimum monthly amount. This will affect your credit rating, as you’re unable to cover the minimum payment that was set out in your credit agreement.
Can my creditors keep charging fees or adding interest during a DMP?
DMP providers cannot guarantee that creditors will freeze interest and charges during your DMP. In practice however, most creditors understand that when you’re in financial difficulties, adding further interest or charges will only make things worse.
If your circumstances don’t improve, it’s likely your
creditors will end the original credit agreement, and at that point, will consider stopping further interest and charges.