DEBT MANAGEMENT

What is a debt management plan?

What is a debt management plan?

If you sign up for a plan you will need to work with your DMP provider to establish a budget and work out just how much money you can afford to set aside for your unsecured debts each month.

If you’re one of the 8.3million consumers in the UK struggling with debt, then a debt management plan could be one solution to get your finances back on track. Debt management plans are ideal for people who can make regular repayments for unsecured debts and loans but don’t have enough available cash to meet the agreed repayments. Getting caught in a cycle of mounting debt often means you owe more each month as creditors apply charges to all outstanding sums. With a debt management plan, you can make affordable monthly repayments for your debts and still have money left over to pay for all your daily living expenses.

You can set up a debt management plan anywhere in the UK and for many people, it’s an ideal way to get debts and finances back on track.

WHAT IS A DEBT MANAGEMENT PLAN?

When you sign up for a debt management plan (DMP) you make just one regular and affordable monthly repayment to chip away at your outstanding non-priority debts. Non-priority debts include overdrafts, credit cards, store cards, and personal loans, priority debts include council tax, mortgage or rent payments, and utility charges. So, if you owe money for priority and non-priority debts you may want to speak with an expert at NDS to work out whether a debt management plan is the best way to go.

If you sign up for a plan you will need to work with your DMP provider to establish a budget and work out just how much money you can afford to set aside for your debts each month. There are lots of different DMP providers, and some of them do charge fees for their services, so it’s important to shop around the marketplace before signing any agreement. It’s also vital to ensure your DMP provider is registered with the Financial Conduct Authority.

PROS AND CONS OF DMPS

Some of the benefits of signing up for a DMP include:

  • Can be fee-free, so all repayments are targeted straight at your debts
  • Only requires one monthly payment to your DMP provider, who will then apportion the cash towards each outstanding debt
  • You pay affordable sums of money to your DMP each month
  • Regular reviews ensure your DMP continues to remain affordable

The disadvantages of DMPs can include:

  • It is not legally binding
  • Creditors don’t actually have to agree to accept reduced payments or cancel interest charges, and if this happens the balance owed could actually increase

 

WOULD A DEBT MANAGEMENT PLAN SUIT ME?

If you have the cash available each month to make regular payments then a DMP could be ideal for you. Your advisor will help you set up a monthly budget, so you have cash for all your essential outgoings and any excess cash is targeted towards non-secured loans.

Your credit rating will be impacted when you go on a DMP because you’ll be paying less than the agreed amount for all your debts. This means you won’t find it easy to obtain any further credit.

Get in touch with NDS today to discuss your problem debt issues and find out more about debt management plans.

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