Debt Management Plan

A Debt Management Plan (DMP) is where you or a third party negotiates more affordable monthly payments with your creditors. Unlike other debt solutions, this method is not legally binding.

Your new proposed instalments are based on what you can afford. This is done through an income and expenditure exercise, and your payment term is normally over a longer period of time.

This solution involves you paying back your debt in full, and your creditors have the option to agree to freeze your interest and fees on the debts included, although this is not guaranteed.

A private debt management company will charge a fee for administering a DMP, but there are debt charities who offer the service for free. If you’d like to discuss your options for a DMP, contact Hillcrest today.

Is a debt management plan a good idea?

Hillcrest Finance has a range of debt solutions on offer, and you may find that the personal debt limitations in a DMP could be the most coherent means of repaying time over a respectable time frame. It helps if you can weigh up the pros and cons of a debt management plan.

How does a debt management plan work?

DMPs typically start with a provider like Hillcrest getting to know your expenses, which helps create a picture of your monthly budget. From this budget, we can get a good idea of how much you can pay towards covering your debts. It is done in this fashion so that important payments like bills and living expenses aren’t affected.

When going through a company like Hillcrest Finance, we look after the monthly payment and distribute it evenly amongst your creditors to help ensure they are paid accordingly, and there aren’t any problems.

Advantages of a DMP

When you would prefer to have a third party look after things, our advisors may recommend a DMP. Some advantages of this choice include:

  • Your DMP is not recorded on the insolvency register
  • Your creditors may be more likely to agree as you will be repaying your debt in full
  • Creditors may freeze interest and charges on your debts
  • Using a third party means you have less contact with your creditors
  • DMPs are flexible to your situations

Disadvantages of a DMP

DMPs are typically seen as a more informal process of repaying debt and can carry some minor issues, including:

  • Payment terms are normally longer so it can take a while to pay back your debts
  • You are liable to pay your debts back in full
  • Your creditors may not agree to freeze your interest and charges
  • Your creditors may not agree to reduced payments
  • Creditors do not need to stop contacting you with this solution
  • Private debt solution companies will charge you a fee for a DMP service
  • A DMP could negatively impact your credit rating

Understanding what can and can’t be paid with a DMP

DMPs only cover certain debts, namely loans, overdrafts, credit cards (including store cards) & money borrowed from family and friends.

This type of plan will typically not cover fines, bills, taxes & any loans against property.

Does a debt management plan affect your credit rating?

Yes. This type of plan can lower your credit rating as you’re paying a lower amount over a set period. If you’d like to keep your credit score at a higher level and can pay a larger/lump sum, you may be interested in getting a Debt Settlement Offer.

Get help with personal debt

If you’d like to know whether your debt can be covered with a DMP, please get in touch with Hillcrest Finance today. Our advisors are here to offer free advice on your options, with no obligation on your part.

Phone lines are open every weekday from 8am. Give us a call on 0141 478 0862. You can also get in touch via WhatsApp.

Get in touch with us about a DMP today