Things To Know About Debt Management Plan
Struggling with debt payments on things like credit cards, mortgages, loans, bills and etcetera? Then, debt management plan just might be what you need.
Debt Management Plan (DMP) – is an informal agreement between you and your creditors for paying back your non-priority debts. Non-priority debts are things like credit cards, loans, and store cards. You pay back the debt by one set monthly payment, which is divided among your creditors. Most DMPs are managed by a DMP provider who deals with your creditors for you. This means you don’t need to deal with your creditors yourself. A DMP is not legally binding, meaning you’re not tied in for a minimum period and can cancel it at any time.
Check if DMP is right for you –
> It may apply to you if you can afford monthly repayments on your priority debts (mortgages, rent & taxes) and your living costs, but are having difficulties with credit card and loans.
> You may want someone to handle your creditors.
> Making one set monthly payment will help you to budget.
***You need to note though that, you need to be sure you understand the impact a DMP will have.
> It may take longer to pay back your debt because you’ll be paying less each month.
> Your creditors will not necessarily freeze the interest and charges on your debts, so the amount you owe might go down by less than you think.
> Your DMP provider might charge you a fee, but there are several free providers you can use so there’s no need to pay if you don’t want to.
> Your creditors might refuse to co-operate or continue to contact you.
> The DMP may show on your credit record, making it more difficult for you to get credit in the future.
If you are not sure whether this sounds like it is right for you, you may want to consider other options in dealing with your debts.
Availing of DMP – Once you decided that debt management plan is right for you, you will need to follow few things in setting up:
> Make sure you’ve sorted out your priority debts first.
> Work out your budget to see if you have enough available income to make your monthly payment.
> Choose a DMP provider, remembering that you can choose a free provider.
> You need to check the details of the agreement or contract carefully.
Before you start – Try to find your most recent bank statements, payslip, debit and credit card statements or bills receipts for things you usually pay for in cash.
Make sure you include all your expenses, for example, the money you spend on your partner or family.