If you can borrow money to make your important purchases, it will make your dreams come true.
But, if the situation arises that the payments on debts become more than you manage then the situation seems likely to be worse.
One way out of this uncomfortable scenario is that you may plan and execute to take a debt management plan. You can go forward with the help of a consumer credit counselor.
In this article, you can find out how it works and for which debts you can use this plan too.
Is DMP right for you?
A debt management plan let you pay off your debts at an affordable rate. A debt management plan allows you to make a single monthly payment against all of your unsecured debts. These unsecured debts must be included in this plan.
A debt repayment plan can simplify your repayment process. And it will shorten the time that this plan takes to get you out of all the debts.
Most of the debt management plans are provided by DMP providers. They will deal with your creditors on your behalf of you. Which means you do not need to deal with your creditors.
How a DMP works?
The DMP provider will help you to manage affordable payments and also talk to your creditors. Generally, you need to have at least £5 or more for repayments to each of your creditors. But, this amount can vary among the providers.
You just need to make one single monthly payment to your DMP provider. Then they will pay your creditors for you.
How to get a debt management plan?
You need to consult with a debt management company authorized by FCA. You need to search for the financial debt management plans that they offer.
The company will ask for your financial details such as your monthly income, debts, your assets, etc. The company contacts its creditors and asks them if they agree with the debt management plan.
Then, you need to agree with the terms of the plan. You have to make single monthly payments to the company.
To continue a debt management plan you need to keep up your payments to the company. Otherwise, it may get canceled.
Some debt management company charges you a set-up cost as well as a handling fee. They will ask for this handling fee for making each payment.
Which debts can I pay off with a debt management plan?
You can use a debt management plan to pay off only the non-priority debts:
- Personal loans
- Overdrafts
- Money loaned from family or friends
- Bank or building society loans
- Credit card, store card debts
- Catalog, home credit
- In-store credit debts
Which debts can’t I pay off with a debt management plan?
You can’t use debt management plans to pay off the priority debts:
- Council Tax
- TV license
- Gas and electricity bill
- National Insurance, VAT, and Income Tax
- Child support and maintenance
- Court fines
- Rent, mortgage, or any loan that you have taken against your home
- To hire any purchase agreements
Is a Debt management plan right for you?
You can find a DMP that is right for you if the following apply to you:
- If you would like someone to deal with your debts.
- Making single monthly payments helps you budget.
- You can afford your priority debts such as home debt, council tax, mortgage, etc.)
- You will have better control over your finance.
- There are more probabilities to be eliminating your current debts.
- You will not have to constantly suffer from the stress of late payment.
Who offers a debt management plan?
There are various Debt advice organizations to advise you if a DMP provider is right for you or not. Some of them also help you to get the appropriate DBT.
It will ensure that all the money you put into it goes towards paying off your debts.
While choosing a DBT provider you must ensure that it should have authorization from the Financial Conduct Authority (FCA).
FAQ:
How much can I save with a debt management plan?
Ans: As each of the debt management plans is different, the results can vary. But on average, current MMI clients saved over $25,000 on their overall DMP payments.
Is there any impact of having a debt management plan on my credit score?
Ans: your credit score may turn down at the beginning of your DMP. Because your credit accounts are being closed. But this is temporary; it will improve your on-time payments. As you will start to make your monthly payments on time, your credit score will be progressed.
Can I use a credit card while I am on a debt management plan?
Ans: Any credit card that is involved in your DMP is needed to be closed. Your creditor that is typically a bank or financial organization works with MMI to make a DMP. It will provide you with a lower interest rate to make it possible for your repayments.
The creditors offer you a lower interest rate so that you close the credit card.
Wrap up:
It is always a great thing to consult things with an experienced professional before going forward. So, it is good if you take advice from a debt adviser before taking any DBT plan. Debt advisors help you to take the appropriate decisions.
As the best debt solution depends upon your circumstances. They will show you the way that you may not know about.
