Debt Management Plan FAQ's
What Is A Debt Management Plan?
A debt management plan can help you to reduce payments to your 'non-priority' creditors and free up money to make sure your 'priority' creditors are paid. Your 'priority' creditors include your mortgage lender, council tax, gas and electricity plus your essential living expenses.
How Does A Debt Management Plan Work?
123debthelp will calculate how much you need for priority payments and how much you can afford to pay to non-priority creditors. 123debthelp will then negotiate with your non-priority creditors and agree how much you will pay each creditor on your debt management plan.
Does A Debt Management Plan Reduce Debt?
Your creditors are not obliged to reduce your debt but most are co-operative if they can see that you have a genuine problem. They may freeze interest and charges and accept a lower monthly payment which they know you can afford.
How Long Does A Debt Management Plan Last?
That depends on the level of your debt and the settlement figures agreed. Once we agree a payment plan you can simply divide the settlement figure by the monthly payment and this will tell you how long the Debt Management Plan will last.
Does A Debt Management Plan Affect Credit Score?
If you have missed payments it is likely that your credit rating has already been affected. If you agree a Debt Management Plan creditors may record this on your credit file.
How Much Will A Debt Management Plan Cost?
A Debt Management Plan will not cost you a penny! 100% of the monthly payment that you make goes direct to your creditors. You will receive a statement every month to show exactly how your payments are being distributed.
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A debt management plan (DMP) is one of the simplest and most effective ways of clearing debt from non-priority creditors.
Debt Management Plans are most beneficial for people with high amounts of debt as they can be used for paying any personal unsecured debt that you may have.
A debt management plan is designed to consolidate all of your unsecured debts, and accumulate them into one affordable monthly payment.
The basic procedure of a debt management plan is simply for the debtor to make a monthly affordable payment to a debt management company, who then distribute the money to the creditors. This monthly payment is calculated by the debt management company, taking into account your monthly income and outgoings.
The debt management plan works on all of your non-priority debts such as unsecured loans, credit cards, and overdrafts.
A debt management company will do an assessment of all factors, and create a personal debt management plan that is tailored to you. A realistic payment plan is calculated, leaving you with more money each month, and still keeping on top of paying your bills.
It should also be remembered that creditors are not always going to accept a debt management plan, and a lot of negotiation often has to be carried out between your creditors and your debt management agent. Debt management plans are basically a way of bringing a third party into the equation of your debts.
A debt management plan is only used to deal with debt that is in the plan and cannot be used for other secured debts and priority payments, such as mortgages, secured loans, car hire repayments, rent and utility bills.
There are many alternatives to a debt management plan, including bankruptcy, iva’s, and consolidation loans. Each individual needs to be assessed to see which option is right for them.
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