Is a Debt Management Plan Right for You? image wording Debt Management Plan

Is a Debt Management Plan Right for You?

Are you struggling with debt? Is a debt management plan right for you?

It follows you around, and sometimes you can feel at your wit’s end. With a myriad of options available, it’s hard to know what all of them are or do.

Debt management plans are one option for those with high unsecured debt to consider. The bar to qualify is attainable, and most individuals with a source of income can start one. If they are right for you, DMPs can help simplify and make debt repayment more affordable.

If you’ve been struggling with debt, you’re in the right place. Read on for an overview of debt management plans in the UK.

What Is a Debt Management Plan (DMP)?

For those who have seen their debt continue to grow, especially as a result of the pandemic, the prospect of managing it can be difficult. A debt management plan could be the first step in getting back on track, but it’s important to know what it is first. To do that, we have to clarify some terms.

There are two types of debt you are most likely to incur: secured and unsecured debt. Secured debt often comes with collateral, like when it comes to large-scale loans. Your house mortgage or monthly car payments both count as secured debt.

Often secured debt comes with terms attached, which make it difficult to get out of. The bank may try to repossess your home, or you may need to give up your car if you can’t pay. There are methods and services to help with secured debt, but a debt management plan focuses on unsecured debt.

Unsecured debt refers to debt that doesn’t have any collateral behind it. Think of your credit card, for example. A debt management plan will allow you to lump all your unsecured debt into one monthly payment.

How Does a DMP Work?

The agency in charge of setting up and managing the DMP will consider your budget and finances. The goal of a DMP is to factor in how much money you have coming in and which bills take the most priority. These calculations will consider living expenses and any secured loans you have.

DMPs allow you to tackle your unsecured debt without falling behind on mortgages. Once you’ve decided on an affordable amount, the agency will take the next step.

They will talk to your creditors on your behalf. More often than not, they get them to freeze interest and accept a new repayment plan based on your DMP.

A DMP will also split your monthly payment across your various debts based on priority. The creditors you owe the most to will get the largest piece of the monthly payment, and so on. DMPs work by giving you the option to pay off your debt over time and by