It allows you to pay back your debts at a rate you can afford. The rate at which you pay it back is calculated by taking into consideration all of your income and all your outgoings. Debt management is ideally suited to debts that are classed as non-priority (credit cards, loans, store cards, overdrafts and others). However, debt management services are not ideal for priority debts such as council tax, court fines and mortgage arrears.
Debt Management Services
Debt Management is an informal arrangement between yourself and your creditors
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A debt management plan (DMP) assists you in handling your debts and paying them off at a more manageable rate by offering reduced monthly payments. The idea is that we work closely with you to put together a budget that satisfies your household needs. If a DMP looks like a suitable avenue for you to explore, we’ll help you set up and manage it – at no expense to you.
Many debt management services see the provider charging a fee for their work in putting together a DMP, but a fee isn’t applied in very single case. It’s crucial to remember that if you don’t want to pay a fee, it’s not mandatory. You simply need to identify a free provider. This page explains how you can find relevant debt advice in the UK.
Why do some DMP providers apply a fee?
A DMP provider operates on your behalf to figure out what you can afford to pay. The objective is to reach an acceptable plan with your creditors and then distribute payments to these creditors on a monthly basis. Clearly, any organisation or agency providing debt management support of this nature will have expenses that it must cover.
Most commercial DMP or debt management solutions providers address these costs by charging a fee to their clients. Meanwhile, the free providers (usually charities), are compensated directly by the banks and credit card companies – which means they don’t need to extend any fees to the end customer. That’s definitely something to bear in mind when seeking debt management help.
Can you achieve access to a superior service by paying the fee?
Many fee-charging DMP providers insist that you’ll receive better overall debt management support by paying a fee. They may also claim that because they’re being paid by you, instead of the creditor, this proves that they’re working in your best interest. It’s always up to you to judge for yourself when seeking debt advice. However, there’s no need to pay a fee if you really don’t want to.
The best way to apply for a DMP
- Find out if a DMP is the best available of all the debt management solutions for you. Use the debt advice tool here or contact one of our expert advisors.
- If we decide that a DMP is the right course, we’ll develop a ‘personal action plan’ and support you with relevant debt management advice throughout the process.
- When we have all the necessary information we need, we’ll connect with your creditors and you then commence payments to them via your DMP.
If you select a fee-charging provider
If you opt for a DMP or debt management solutions service from a provider that charges a fee, there are a several important details to be aware of.
- A paid DMP will probably last longer compared to a free service, as less money will be transferred to your creditors monthly with the former type of arrangement. Bear this in mind when seeking debt management help – you want a firm idea of the timetable.
- Fees include (but are not limited to) a set-up fee, deposit or a regular fee deducted from the monthly payments – so make sure the costs are reasonable before you commit yourself to this type of debt management help.
- It’s not acceptable for more than 50% of the cash you hand over to a DMP provider to be allocated to the fee expenses – in other words, a minimum of 50% should be transferred to your creditors, and this sum should be ramped up after the first six months.
- The cost of administering the DMP should be spread out evenly over the agreed term. Make sure you check with your debt management UK provider that the payments are set out in a clear, predictable fashion.
- Cancellation of a DMP could leave you out of pocket as you may not secure a refund of any fees or charges. In some cases, a cancellation fee will be applied. So be sure to scour through the agreement very carefully.
Make sure you do your research carefully before reaching a decision on which type of organisation is well placed to offer the best debt management help for your situation.
Stressed about debt?
Contact us today – via phone or online chat – for the very best debt management advice. Simply request a call back and one of our trained debt advisers will be in touch as soon as possible.