One of the most widely used solutions to financial problems used by people in the UK is a Debt Management Plan (DMP). If you are having trouble keeping up with your debt repayments then this could be the best option for you.

What is a Debt Management Plan?

A debt management plan is an informal debt consolidation arrangement designed to help people with financial troubles. They provide a means for people struggling to meet their monthly debt repayments to consolidate their debts into a single payment based on what they can afford. People can attempt to negotiate a plan themselves or more commonly do so via a third party.

What do Debt Management Companies do?

In the UK there are many specialist debt management companies that will negotiate a plan on your behalf. As part of their service the company should arrange a freeze on any interest and charges relating to your debts. They should also request that your creditors do not take any legal action to recover the debt providing you keep up with the agreed payments. The debt management company will distribute the consolidated payments between the creditors.

What are the Advantages of Debt Management Plans?

The main benefit of a DMP is that it is an effective way of lowering your debt repayments to an amount you can afford. By consolidating your debts it simplifies your finances into an easier to manage single payment. Unlike IVAs they aren’t bound by strict qualifying and can be fitted to suit a wide range of circumstances.

What are the Drawbacks of Debt Management Plans?

A debt management plan isn’t always the best solution and in some cases bankruptcy or an IVA will be more appropriate. The informal nature of the arrangement means that there is no legal guarantee that the terms of the plan will be adhere to. Therefore it is possible that creditors will decide to add further interest and charges on the debt.