A debt management plan, or DMP can help you feel more in control of your finances if you’re struggling to repay your debts.
It allows you to make a single monthly payment towards your debts, based on what you can afford, after you’ve covered your essential living costs.
So, let’s take a look at some of the benefits and risks of a DMP.
A DMP can be a more affordable way for you to manage your debts, and at StepChange we don't charge any fees for managing your plan or contacting your creditors.
The whole of your monthly payment goes towards repaying the money you owe, and you’ll be able to track your progress as you move out of debt.
When your DMP is up and running you'll make your payments to us, and we’ll then distribute it among your creditors.
And then each year, you’ll need to review your finances and plan with us. This is important, not only to make sure that a DMP is still suitable for you and your circumstances, but to also prevent your plan from being stopped.
That hopefully sounds good. However there are several risks that you’ll need to consider.
A DMP shows your creditors that you're willing to pay back the money you owe, and in many cases they'll stop adding interest and charges to your debts. But this isn’t a guarantee, and they can still continue to apply interest and charges to your debt, and take further action including taking you to court.
It’s also worth remembering that because you're making lower payments towards your debts your credit file may be affected and it may take longer to pay your debts back.
Finally, it's important to get expert debt advice to make sure it's suitable for you.
We offer free debt advice online or over the phone. We'll help you put together a realistic budget and a recommend the most suitable debt solution for you.
If an DMP is a solution that’s appropriate for your circumstances, we'll help you set it up and be here to support you every step of the way.